NPV Your division is considering two projects with the following net cash flows (in millions):
Year 0 Year 1 Year 2 Year 3
Project A: -$25 $5 $10 $17
Project B: -$20 $10 $9 $6
a. What are the projects’ NPVs, assuming the WACC is 5 percent? 10 percent? 15 percent?
b. What are the projects’ IRRs at each of these WACCs?
c. If the WACC were 5 percent and A and B were mutually exclusive, which would you choose? What if the WACC were 10 percent? 15 percent? (Hint: The crossover rate is 7.81 percent.)