# DiepAnhNguyen-Assignment-6.docx - Diep Anh Nguyen ID...

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Diep Anh Nguyen ID: 1516259 Email: [email protected] FIN 3331 ASSIGNMENT 6: CHAP 11 11-1 NPV Project K costs \$52,125, its expected net cash inflows are \$12,000 per year for 8 years, and its WACC is 12%. What is the project’s NPV?
11-2 IRR Refer to Problem 11-1. What is the project’s IRR?
11-3 MIRR Refer to Problem 11-1. What is the project’s MIRR?
Obtain the FVA by inputting N = 8 I/YR = 12 PV = 0 PMT = 12000, Then solve for FV = \$147,596. The MIRR can be obtained by inputting N = 8, PV = -52125 PMT = 0 FV = 147596 Then solving for I = 13.89%. 11-4 PAYBACK PERIOD Refer to Problem 11-1. What is the project’s payback?
11-5 DISCOUNTED PAYBACK Refer to Problem 11-1. What is the project’s discounted payback?
11-6 NPV Your division is considering two projects with the following net cash flows (in millions): 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%.) Answer:
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.