A firm with a WACC of 12% is considering the following mutually exclusive projects.
YearProject 1Project 2
0 (700) (800)
aWhat in the pay back period?
bWhat is the discounted payback period?
cWhat is the NPV?
dWhat is the IRR?
e.What is the MIRR?
f.Which project should be accepted? Why can only one project be accepted?
Which method a-e did you base your decision on? Why?
- 多聞明王Lv 61 decade agoFavorite Answer
a. p1-year5(50+100+200+200+300=850), p2-year3(300+300+200=800)b. p1-year6(44.64+79.72+142.36+127.1+170.23+151.99=716.04) p2-year5(267.86+239.16+142.36+127.1+56.74=833.22)c. p1-716.04 p2-858.55d. p1-13% p2-15%e. this question doesn't tell the reinvestment rate....can't calculate MIRRf. Which project should be accepted? An:P2 Why can only one project be accepted? An: Because this is a mutual exclusive project, the firm can only choose one project of two which is worth to invest. The reason might be the firm only has a constant fund or constant resources to invest only one project. Which method a-d did you base your decision on? Why?, An: Any method out of a-d all pointed that P2 is worth to invest, P2 has earlier payback period and discounted payback period, higher NPV and higher IRR. P1 P2a.pay back period Y5 Y3 b.discounted payback period Y6 Y5c.NPV 716.04 858.55d.IRR 13% 15%
2006-05-05 11:38:30 補充：
right....Source(s): 我是griffith 的臥龍, QUT or UQ 的傢伙不要再猖狂了!!!!!
- darlroomfanLv 510 years ago
In some definitions of MIRR, they assume that reinvestment is the cost of capital (wacc in this case).
- actuary-will-beLv 41 decade ago
- 1 decade ago
project 1 project 2
a. 4.5yrs 3yrs
b. 5.11yrs 4.41yrs
c. 16.04 58.55
d. 12.63% 15.29%
e. 12.42% 13.33%
f.projuct B. You can only choose one becasue of mutually exclusive projects. NPV is better for choosing among competing projects because it provides a better indicator of how much each project will increase the value of the firm.