Problem
NPV Your division is considering two projects with the following cash flows (in millions): 0123 Project A $25 $5 $10 $17 Project B $20 $10 $9 $6.
i. What are the projects' NPVs assuming the WACC is 5%? 10%? 15%?
ii. What are the projects' IRRs at each of these WACCs?
iii. If the WACC was 5% and A and B were mutually exclusive, which project would you choose? What if the WACC was 10%? 15%? (Hint: The crossover rate is 7.81%.)