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NPV

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Your division is considering two projects with the following net cash flows:

year Project A Project B
0 (25) (20)
1 5 10
2 10 9
3 17 6

a) What are the projects' NPVs, assuming the WACC is 5 percent? 10 percent? 15 percent?
b) What are the project' IRRs each of these WACCs?
c) If the WACC were 5 percent and A and B were mutually exclusive, which would you choose? What if the WACC were 10 percent? 15 percent?

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This solution is comprised of a detailed explanation to answer the NPV and IRR of each Project.

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NPV
Your division is considering two projects with the following net cash flows:

year Project A Project B
0 (25) (20)
1 5 10
2 10 9
3 17 6

a) What are the projects' NPVs, assuming the WACC is 5 percent? 10 percent? 15 percent?

NPV is calculated by finding the present value of each cash flow, including both cash inflows and outflows, discounted at the project's cost of capital.

NPV = sum of CFt where CF is the cash flow
(1 + k)t k is the cost of capital
t is the ...

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