Purchase Solution

# Capital Budgeting: Calculate NPV, IRR, MIRR, and Payback for Each Project

Not what you're looking for?

A firm with a 14% 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
Project A -\$6,000 \$2,000 \$2,000 \$2,000 \$2,000 \$2,000
Project B -\$18,000 \$5,600 \$5,600 \$5,600 \$5,600 \$5,600

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?

##### Solution Summary

This solution provides NPV, IRR, MIRR, cumulative cash flow, payback period, discounted cash flow and discounted payback for the two projects and answers for the three discussion questions in the attached Excel file.

##### MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

##### Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.