A firm is evaluating two capital projects, Project M and Project N, to determine which to undertake. It is provided the projects' after-tax cash flows and a 14% WACC. It must calculate various metrics for each project, including NPV, IRR, MIRR, payback period, and discounted payback period, and determine which project(s) to recommend based on the projects being independent or mutually exclusive. The document notes that a conflict can arise between NPV and IRR when projects have the same cash flow timing patterns.
Problem 11-07 A firm with a 14- WACC is evaluating two projects for th.docx
1. Problem 11.07
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 for each project. Do not round
intermediate calculations. Round your answers to the nearest cent. Project M : $ Project N: $
Calculate IRR for each project. Do not round intermediate calculations. Round your answers to
two decimal places. Project M : % Project N: % Calculate MIRR for each project. Do not round
intermediate calculations. Round your answers to two decimal places. Project M: % Project N: %
Calculate MIRR for each project. Do not round intermediate calculations. Round your answers to
two decimal places. Project M: % Project N: % Calculate payback for each project. Do not round
intermediate calculations. Round your answers to two decimal places. Project M: years Project
N: years Calculate discounted payback for each project. Do not round intermediate calculations.
Round your answers to two decimal places. Project M: years Project N: years b. Assuming the
projects are independent, which one(s) would you recommend? c. If the projects are mutually
exclusive, which would you recommend? -Select- d. Notice that the projects have the same cash
flow timing pattern. Why is there a conflict between NPV and IRR?