Solution to FM12 Ch 11 P23 Build a Model

# Solution to FM12 Ch 11 P23 Build a Model - Chapter 11...

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Chapter 11. Solution for Chapter 11 P23 Build a Model Expected net cash flows Time Project A Project B 0 (\$375) (\$575) 1 (\$300) \$190 2 (\$200) \$190 3 (\$100) \$190 4 \$600 \$190 5 \$600 \$190 6 \$926 \$190 7 (\$200) \$0 @ a 12% cost of capital @ a 18% cost of capital WACC = 12% WACC = 18% NPV A = \$226.96 NPV A = \$18.24 NPV B = \$206.17 NPV B = \$89.54 b. Construct NPV profiles for Projects A and B. Project A Project B \$226.96 \$206.17 0% \$951.00 \$206.17 2% \$790.31 \$206.17 4% \$648.61 \$206.17 6% \$523.41 \$206.17 8% \$412.58 \$206.17 10% \$314.28 \$206.17 12% \$226.96 \$206.17 14% \$149.27 \$206.17 16% \$80.03 \$206.17 18% \$18.24 \$206.17 20% (\$36.98) \$206.17 22% (\$86.39) \$206.17 24% (\$130.65) \$206.17 Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: a. If you were told that each project's cost of capital was 12 percent, which project should be selected? If the cost of capital was 18 percent, what would be the proper choice? Use Excel's NPV function as explaine

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Solution to FM12 Ch 11 P23 Build a Model - Chapter 11...

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