# PROBLEM 11-1 NPV Project K costs \$52,125, its expected cash...

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Name: Le Duy Thai Duong Troy ID: 1445296 Instructor: Dr. William Cheng Course:FIN 3331 Assignment 6 CHAPTER 11 PROBLEM 11-1 NPV Project K costs \$52,125, its expected cash inflows are \$12,000 per year for 8 years, and its WACC is 12%. What is the project's NPV?
PROBLEM 11-2 IRR Refer to Problem 11-1. What is the project's IRR?
PROBLEM 11-3 MIRR Refer to Problem 11-1. What is the project's MIRR?
PROBLEM 11-4 PAYBACK PERIOD Refer to Problem 11-1. What is the project's payback? Year CF Cumulative CF 0 -52,125 -52,125 1 12,000 -40,125 2 12,000 -28,125 3 12,000 -16,125 4 12,000 -4,125 5 12,000 7,875 6 12,000 19,875
PROBLEM 11-5 DISCOUNTED PAYBACK Refer to Problem 11-1. What is the project's discounted payback? Year Annual CF Discounted CF (12%) Cumulative Discounted CF 0 -52,125 \$-52,125.00 -52,125.00 1 12,000 \$10,714.29 (41,410.71) 2 12,000 \$9,566.33 (31,844.39) 3 12,000 \$8,541.36 (23,303.02) 4 12,000 \$7,626.22 (15,676.81) 5 12,000 \$6,809.12 (8,867.69) 6 12,000 \$6,079.57 (2,788.11) 7 12,000 \$5,428.19 2,640.08 8 12,000 \$4,846.60 7,486.68
PROBLEM 11-6 NPV Your division is considering two projects with the following cash flows (in millions): Project A ProjectB Year 0 -25 -20 Year 1 5 10 Year 2 10 Year 3 17 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 W ACC 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 %.) 9 6
Change I/YR =10 to I/YR = 15; NPV = -\$1.91 Project B CF0 = -20 CF1 = 10 CF2 = 9 CF3 = 6 I/YR = 5 NPV = \$2.87 Change I/YR = 5 to I/YR = 10; NPV =\$1.04 Change I/YR =10 to I/YR = 15; NPV =\$0.55 b/ Change I/YR = 5 to I/YR = 10; IRR = 11.10% Change I/YR =10 to I/YR = 15; IRR =13.18% c/ WACC = 5%, NPV A > NPV B so choose Project A WACC = 10%, NPV B > NPV A so choose Project B WACC = 15%, both NPVs are less than zero, so neither project would be chosen.