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Problem 11-1 NPV Project K costs $52, 125, its ex...




Problem 11-1 NPV Project K costs $52, 125, its expected net cash inflows are $12000 per year for 8 years, and its WACC is 12 percent. What is the project?s NPV? Problem Capital budgeting criteria. A firm with a 14 percent WACC is evaluating two projects for this year?s capital budget. After tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 1-------1-------1------1-------1-------1 Project A -$6000 $2000 $2000 $2000 $2000 $2000 Project B -$18000 $5600 $5600 $5600 $5600 $5600 (a) Calculate NPV, IRR, MIRR, payback, and discounted payback for each project. (b) Assuming the projects are independent, which one or ones would you recommend? (c) If the projects are mutually exclusive, which would you recommend? (d) Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?


Paper#8673 | Written in 18-Jul-2015

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