Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is

10% and that the investments will produce the following after-tax cash flows (in millions of dollars):

Year Project A Project B

1 5 20

2 10 10

3 15 8

4 20 6

a. What is the regular payback period for each of the projects?

b. What is the discounted payback period for each of the projects?

c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake?

d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

f. What is the crossover rate?

g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?

Requirements of the assignment:

All papers must follow all APA requirements. (10% deduction if not)

Two Page Minimum and Maximum.

Title page and reference pages are required. However, they do not count towards any page count.

Writing should reflect an understanding of the chapter’s basic concepts, thorough research, and logic and critical thinking skills.

The introduction is attention getting with sufficient background information to establish the topic and a clear thesis statement.

The conclusion summarizes the main points and leaves the reader with a strong comprehension of the paper’s significance and the author’s understanding.

Grammatically correct – No spelling, grammar, or mechanics errors.

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