Payback, NPV, and MIRR
Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars):
Year Project A Project B 1 5 20 2 10 10 3 15 8 4 20 6
A. What is the regular payback period for each of the projects? Round your answers to two decimal places.
Project A ____ years
Project B ____ years
B. What is the discounted payback period for each of the projects? Round your answers to two decimal places.
Project A _____ years
Project B _____ years
C If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?
-Select-Project A Project B Both projects
D If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
-Select- Project A Project B
E If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
-Select-Project A Project B
F. What is the crossover rate? Round your answer to two decimal places.
____ %
G. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.
Project A _____ %
Project B _____ %
Payback, NPV, and MIRR
Your division is considering two investment projects, each of which requires an up-front expenditure of $22 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars):
| Year | Project A | Project B |
| 1 | 5 | 20 |
| 2 | 10 | 10 |
| 3 | 15 | 8 |
| 4 | 20 | 6 |
A. What is the regular payback period for each of the projects? Round your answers to two decimal places.
Project A ____ years
Project B ____ years
B. What is the discounted payback period for each of the projects? Round your answers to two decimal places.
Project A _____ years
Project B _____ years
C If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?
-Select-Project A Project B Both projects
D If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
-Select- Project A Project B
E If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
-Select-Project A Project B
F. What is the crossover rate? Round your answer to two decimal places.
____ %
G. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.
Project A _____ %
Project B _____ %
Related questions
Your division is considering two investment projects, each of which requires an up-front expenditure of $24 million. You estimate that the cost of capital is 9% and that the investments will produce the following after-tax cash flows (in millions of dollars):
(10 points)
| Year | Project A | Project B |
| 1 | 5 | 20 |
| 2 | 10 | 10 |
| 3 | 15 | 8 |
| 4 | 20 | 6 |
What is the regular payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
What is the discounted payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?
If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
What is the crossover rate? Round your answer to two decimal places.
%
If the cost of capital is 10%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.
Project A %
Project B %
Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars):
(10 points)
| Year | Project A | Project B |
| 1 | 5 | 20 |
| 2 | 10 | 10 |
| 3 | 15 | 8 |
| 4 | 20 | 6 |
What is the regular payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
What is the discounted payback period for each of the projects? Round your answers to two decimal places.
Project A years
Project B years
If the two projects are independent and the cost of capital is 8%, which project or projects should the firm undertake?
Project A
Project B
Both projects
If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?
-Project A
Project B
If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?
Project A
Project B
What is the crossover rate? Round your answer to two decimal places.
%
If the cost of capital is 8%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.
Project A %
Project B %
