CENGAGE MINDTAP

Ch 11-End-of-Chapter Problems - The Basics of Capital Budgeting

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Attempts

5. Problem 11.17 (Capital Budgeting Criteria)

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Problem Walk-Through

A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:

0

1

5

Project A

Project B

2

-$300 -$387

-$193 -$100 $600

$600 $850 -$180

-$405 $131 $131 $131 $131 $131 $131 50

Q Sear

a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent.

Project A: $

Project B: $

b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.

Project A:

Project B:

c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.

Project A:

Project B