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Question Description

Instructions:

I need you to answer the following two questions in an Excel File.

You must show formula and caculation not just type your answers in the cells.

11-7 CAPITAL BUDGETING CRITERIA A firm with a 14% WACC is evaluating two projects for

this year’s capital budget. After-tax cash flows, including depreciation, are as follows:

a. Calculate NPV, IRR, MIRR, payback, and discounted payback for each project.

b. Assuming the projects are independent, which one(s) 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?

11-13 MIRR A firm is considering two mutually exclusive projects, X and Y, with the following

cash flows:

The projects are equally risky, and their WACC is 11%. What is the MIRR of the project that

maximizes shareholder value?