Question: Your division is considering two projects with the following net cash flows (in millions): a. What are the projects? NPVs assuming the WACC is 5%?

Your division is considering two projects with the following net cash flows (in millions):

3 2 + + Project A Project B - $25 $5 $10

a. What are the projects? NPVs assuming the WACC is 5%? 10%? 15%?

b. What are the projects? IRRs at each of these WACCs?

c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? What if the WACC was 10%? 15%?

3 2 + + Project A Project B - $25 $5 $10 $17 $10 $6 -$20

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