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Project k costs 52125 its expected net cash inflows are

Problems -

1. Project k costs $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its WACC is 12 percent. What is the projects NPV?

2. Refer to problem 1. What is the project's IRR?

3. Refer to problem 1. What is the project's payback?

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

Project A -25 $5 $10 $17

Project B -20 $10 $9 $6

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

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

c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? What if the WACC was10%? 15%? (Hint: the crossover rate is 7.81 %.)

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Accounting Basics: Project k costs 52125 its expected net cash inflows are

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