# Capital budgeting criteria A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:

1)Capital budgeting criteria A company has a 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 Project A -\$300 -\$387 -\$193 -\$100 \$600 \$600 \$850 -\$180 Project B -\$405 \$132 \$132 \$132 \$132 \$132 \$132 \$0
What is each project’s NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.
What is each project’s IRR? Round your answer to two decimal places.
What is each project’s MIRR? (Hint: Consider Period 7 as the end of Project B’s life.) Round your answer to two decimal places. Do not round your intermediate calculations.
Construct NPV profiles for Projects A and B. Round your answers to the nearest cent. Do not round your intermediate calculations. Negative value should be indicated by a minus sign.
Calculate the crossover rate where the two projects’ NPVs are equal. Round your answer to two decimal places. Do not round your intermediate calculations.
What is each project’s MIRR at a WACC of 18%? Round your answer to two decimal places. Do not round your intermediate calculations.
Project A: \$ Project B: \$ Project A: % Project B: % Project A: % Project B: % _________ Project A Project B If the WACC was 18%, which project would be selected? _________ Project A Project B Discount Rate NPV Project A NPV Project B 0% \$ \$ 5 \$ \$ 10 \$ \$ 12 \$ \$ 15 \$ \$ 18.1 \$ \$ 23.33 \$ \$ % Project A: % Project B: %Reset Pr oblem 2)Expected and Required Rates of Return You have observed the following returns over time: Year Stock X Stock Y Market 2011 14 % 12 % 12 % 2012 19 5 9 2013 -12 -5 -11 2014 3 2 2 2015 19 10 14 Assume that the risk-free rate is 5% and the market risk premium is 6%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. What is the beta of Stock X? Do not round intermediate calculations. Round your answer to two decimal places.
What is the required rate of return on Stock X? Do not round intermediate calculations. Round your answer to one decimal place.
What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to one decimal place.   