Division is considering two investment projects

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Your division is considering two investment projects, each of which requires an up-front expenditure of $24 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars): Project A year 1 = 5, year 2 = 10, year 3= 15, year 4 = 20. Project B year 1 = 20, year 2 = 10, year 3 = 8, year 4= 6.

a) What is the regular payback period for each of the projects (years)? Round your answers to two decimal places.

b) What is the discounted payback period for each of the projects (years)? Round your answers to two decimal places.

c) What is the crossover rate? Round your answer to two decimal places.

d) If the cost of capital is 8%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.

Reference no: EM13721728

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