A company has a 12% WACC and is considering two mutually exclusive inv

QUESTION

A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:Project A: -300, -387, -193, -100, 600, 600, 850, -180Project B: -405, 134, 134, 134, 134, 134, 134, 0a. What is each projects NPV?b. What is each projects IRR?c
NPV: -CF0+CF1/(1+i)^1¦.CFn/(1+i)^n Project A: -300-387/(1+.12)-193/(1+.12)^2-100/(1+.12)^3+600/(1+.12)^4+600/(1+.12)^5+850/(1+.12)^6-180/(1+.12)^7 = 200.41 Project B:-405+134/(1+.12)+134/(1+.12)^2+134/(1+.12)^3+134/(1+.12)^4+134/(1+.12)^5+134/(1+.12)^6 = 145.93 b) IRR:-CF0+CF1/(1+i)^1¦.CFn/(1+i)^n = 0 Project A:¦

300-387/(1+IRR)-193/(1+IRR)^2-100/(1+IRR)^3+600/(1+IRR)^4+600/(1+IRR)^5+850/(1+IRR)^6-180/(1+IRR)^7 = 18.10% Project B:-405+134/(1+IRR)+134/(1+IR)^2+134/(1+IRR)^3+134/(1+IRR)^4+134/(1+IRR)^5+134/(1+IRR)^6 = 23.97%

ANSWER:

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