Excel Problem
XYZ Co. has an 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows.
Years 0 1 2 3 4 5 6 7
Project A (30,000) (38,700) (19,300) (10,000) 60,000 60,000 85,000 (18,000)
Project B (40,500) 13,400 13,400 13,400 13,400 13,400 13,400 0
(numbers in thousands)
Calculations
a. Calculate the Net Present Value of each project.
r
NPV
Project A use the "NPV" formula to compute these
Project B
b. Calculate the Internal Rate of Return of each project.
IRR
Project A use the "IRR" formula to compute these
Project B
c. Based on the results in a and b, which project should be chosen and why?
d. If XYZ's WACC is 18%, what is the NPV and IRR of each project? Which project should be selected and why?
r
NPV
Project A use the "NPV" formula to compute these
Project B
IRR
Project A use the "IRR" formula to compute these
Project B
Selected project: