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EFM-11problem

# EFM-11problem - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17...

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11problem 3/22/2010 7:09 12/19/2005 Chapter 11. Solution to End-of-Chapter Comprehensive/Spreadsheet Problem Problem 11-23 Your division is considering two projects. Its WACC is 10%, and the projects' after-tax cash flows (in millions of dollars) would be: Expected net cash flows Time Project A Project B 0 (\$30) (\$30) 1 \$5 \$20 2 \$10 \$10 3 \$15 \$8 4 \$20 \$6 a. Calculate the projects' NPVs, IRRs, MIRRs, regular paybacks, and discounted paybacks. WACC = 10% Use Excel's NPV function as explained in \$7.74 11model.xls. Note that the range does not include \$6.55 the initial costs, which are added separately. We find the internal rate of return with Excel's IRR function: 19.19% 22.52% We find the modified internal rate of return with Excel's MIRR function using the 10% WACC: 16.50% 15.57% Project A Time period: 0 1 2 3 4 Cash flow: (30) 5 10 15 20 Cumulative cash flow: (30) (25) (15) 0 20 Logical test: 0 0 0 1 0 0.00 0.00 0.00 3.00 0.00 3.00 3.00 Alternative calculation using nested IF statements. Project B Time period: 0 1 2 3 4 Cash flow: (30) 20 10 8 6 Cumulative cash flow: (30) (10) 0 8 14 Logical test: 0 0 1 0 0 0.00 0.00 2.00 0.00 0.00 2.00 2.00 Alternative calculation using nested IF statements. Project A Time period: 0 1 2 3 4 Cash flow: (30) 5 10 15 20 Disc. cash flow: (30.00) 4.55 8.26 11.27 13.66 Disc. cum. cash flow: (30.00) (25.45) (17.19) (5.92) 7.74 3.43 Project B NPV A = NPV B = IRR A = IRR B = MIRR A = MIRR B = Max Row 35=Payback A : Payback A : Max Row 44=Payback B : Payback B : Discounted Payback A : A B C D E F G H I J 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58

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EFM-11problem - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17...

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