Purchase Solution

Capital Budgeting in Excel

Not what you're looking for?

Ask Custom Question

1. If two mutually exclusive projects were being compared, would a high cost of capital favor the longer-term or the shorter-term project? Why? If the cost of capital declined, would that lead firms to invest more in longer-term projects or shorter-term projects? Would a decline (or increase) in the WACC cause changes in the IRR ranking of mutually exclusive projects?

2. 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
Project A -$6000 $2000 $2000 $2000 $2000 $2000
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?

Please see the attachment for clarity in the 2 questions.

Attachments
Purchase this Solution

Solution Summary

This solution provides explanations and equations for various equations regarding capital budgeting in Excel.

Purchase this Solution


Free BrainMass Quizzes
Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Operations Management

This quiz tests a student's knowledge about Operations Management