What are the projects IRRs at each of these WACCs

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Reference no: EM132325956

Problems -

Problem 1 - NPV: Project L costs $65,000, its expected cash inflows are $12,000 per year for 9 years, and its WACC is 9%. What is the project's NPV?

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

Problem 3 - PAYBACK PERIOD: Refer to problem 1. What is the project's payback?

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

	0	1	2	3
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 WACCs?

c. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? What if the WACC was 10%? 15%? (Hint: The crossover rate is 7.81%)

Problem 5 - CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS: Project S costs $17,000, and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L costs $30,000, and its expected cash flows would be $8,750 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend? Explain.

Note - You have to show all your work to earn full credit.

Reference no: EM132325956

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