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(Steps Shown) NPV your division is considering two projects with the following cash flows in millions 0 1 2 3 Project a -$25 5 10 17 Project b -20 10 9

Question: NPV your division is considering two projects with the following cash flows in millions

0 1 2 3

Project a -$25 5 10 17

Project b -20 10 9 6

  1. what are the projects NPV assuming the WACC is 5%? 10%? 15%?
  2. What are the projects’ irrs at each of these WACCs?
  3. 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%

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