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Consider projects A and B with the following cash flows:
C0 C1 C2 C3
A − $ 37 + $ 21 + $ 21 − $ 21
B − 62 31 31 31
a-1. What is the NPV of each project if the discount rate is 12%?
a-2. Which project has the higher NPV?
b-1. What is the profitability index of each project? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b-2. Which project has the higher profitability index?
c-1. Which project is most attractive to a firm that can raise an unlimited amount of funds to pay for its investment projects?
c-2. Which project is most attractive to a firm that is limited in the funds it can raise?
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FINM321 PROJECT 2016 - Calculate the cost of debt and calculate the weighted average cost of capital based on market values. Only include equity and long term debt in your calculation.
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