Problem:
A firm with a 14 percent WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:
0 1 2 3 4 5
Project A -6,000 2,000 2,000 2,000 2,000 2,000
Project B -18,000 5,600 5,600 5,600 5,600 5,600
1) Calculate NPV, IRR, MIRR, payback, and discounted payback for each project.
2) Assuming the projects are independent, which one or ones would you recommend?
3) If the projects are mutually exclusive, which would you recommend?