Capital Budgeting Criteria A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows.
Project a -$300 -$387 -$193 -$100 $600 $600 $850 -$180
Project b -$405 $134 $134 $134 $134 $134 $134 $0
a. What is each projects NPV
b. What is each projects IRR
c. What is each projects MIRR?(consider project 7 as the end of project b’s life)
d. From your answers to parts a b and c, which project would be selected? If the WACC was 18%, which project would be selected?
e. Construct NPV profiles for Projects A and B
f. Calculate the crossover rate where the two projects NPV’s are equal
g. What is each project’s MIRR at a WACC of 18%?