Question: Your division is considering two projects. Its WACC is 10%, and the projects after-tax cash flows (in millions of dollars) would be as follows: Year0

Your division is considering two projects. Its WACC is 10%, and the projects after-tax cash flows (in millions of dollars) would be as follows:

Year0 1 2 3 4

Project A -$30$5$10$15$20

Project B -$30 $20 $10 $8 $6

a. 1. Calculate the projects NPVs, IRRs, MIRRs, regular paybacks, and discounted pay-backs.

2. If the two projects are mutually exclusive, which project(s) should be chosen? Dof the measures of profitability from part1 contradict each other? Explain why you decided for one or the other project.

b. If the WACC was 5%, would this change your? If the WACC was 15%, would this change your recommendation? Explain your answers.

c. Define the MIRR. Whats the difference between the IRR and the MIRR, and which generally gives a better idea of the rate of return on the investment in a project? Explain.

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