WACC 12%

Year 0 1 2 3 4 5
Project A -300 -387 -193 -100 600 600
Project B -405 134 134 134 134 134

c. What is each project's MIRR?

Year 0 1 2 3 4 5
Project A $ (300.00) $ (387.00) $ (193.00) $ (100.00) $ 600.00 $ 600.00
FV CFI Project A $ 842.96 $ 752.64
PV CFO Project A $ (300.00) $ (345.54) $ (153.86) $ (71.18)
CF Project A $ (952.00) $ - $ - $ - $ - $ -
MIRR 15.10%

Year 0 1 2 3 4 5
Project B $ (405.00) $ 134.00 $ 134.00 $ 134.00 $ 134.00 $ 134.00
FV CFI Project B $ 264.49 $ 236.15 $ 210.85 $ 188.26 $ 168.09
PV CFO Project B $ (405.00)
CF Project B $ (405.00) $ - $ - $ - $ - $ -
MIRR 17.03%

d. From answer in a,b,c, which project would be selected? If WACC was 18%, which project should be selected?
Project A Project B
NPV $200.41 $145.93
IRR 18.10% 23.97%
MIRR 15.10% 17.03%

Using the IRR and MIRR criteria, project B should be selected.

However in most mutually exclusive cases, the NPV is best because it selects project that maximizes value.
So in this mutually exclusive case, Project A is selected because it has higher NPV.

--> If WACC was 18%

Year 0 1 2 3 4 5
Project A -300 -387 -193 -100 600 600
Project B -405 134 134 134 134 134

If WACC was 18%, the NPV of Project B is $63,68. It now has higher NPV than Project A.
Therefore, Project B would be selected if the WACC was 18%.

e. Construct NPV Profiles for Project A and Project B.

Project A
Cost of NPV Project
Capital A Year 0 1
 0% $890 Project A -300 -387
5% $540
10% $283
15% $93 NPV Pro
IRR 18.10% -$0
$1,000890
20% -$49
$800

$600 540.085754706936

NVP ($)
$400
283.341452178974

$200

$0
0% 5% 10%

-$200
Cost Of C

NPV Pr

Project B
Cost of NPV Project
Capital B Year 0 1
0% $399 Project B -$405 $134
5% $275
10% $179
15% $102 NPV Proje
20% $41 $450
399
IRR 23.97% $0 $400
$350
$300 275.142737013838
$250
NPV $

$200 178.604933727938

$150
102.120
$100
$50
$0
0% 5% 10% 1
Cost Of

NPV Pr

f. Calculate the crossover rate where two project's NPVs are equal
Initial Cost End-of-Year Cashflow
Year 0 1 2 3 4 5
Project A -$300 -$387 -$193 -$100 $600 $600
Project B -$405 $134 $134 $134 $134 $134
∆ = CF Project A - CF Project B $105 -$521 -$327 -$234 $466 $466
IRR ∆ 14.53% = Crossover Rate

Cost of NPV Project NPV Project

Capital A B NPV Profiles for
0% $890 $399 $1,000
5% $540 $275
$800
10% $283 $179
14.53% $109 $109 $600

NPV $
15% $93 $102 $400
18.10% -$0 $62
$200
20% -$49 $41
23.97% -$137 $0 $0
0% 5% 10% 15%
-$200
Cost of Ca

NPV Project A

g. What is each project's MIRR at WACC of 18%?

WACC 18%

Year 0 1 2 3 4 5
Project A -$300 -$387 -$193 -$100 $600 $600
Future Value of Cash
$985.82 $835.44
Inflow
Present Value of Cash Out
-$300.00 -$327.97 -$138.61 -$60.86
flow
Cashflow -$883.95 0 0 0 0 0
MIRR 18.05%
18.05% (Alternatif perhitungan dengan rumus)

Year 0 1 2 3 4 5
Project B -$405 $134 $134 $134 $134 $134
Future Value of Cash
$361.74 $306.56 $259.80 $220.17 $186.58
Inflow
Present Value of Cash Out
-$405
flow
Cashflow -$405 0 0 0 0 0
MIRR 20.49%
20.49% (Alternatif perhitungan dengan rumus)
 6 7 NPV IRR MIRR
850 -180 200.41 18.10% 15.10%
134 0 145.93 23.97% 17.03%

6 7
$ 850.00 $ (180.00)
$ 952.00
$ (81.42)
$ - $ 2,547.60

6 7
$ 134.00 $ -
$ 150.08
$ -
$ - $ 1,217.93

ct should be selected?

maximizes value.

6 7 NPV
850 -180 $ 2.66
134 0 $ 63.68

2 3 4 5 6 7
 -193 -100 600 600 850 -180

NPV Project A

0.085754706936

283.341452178974

92.9586877115469
-0.090339829090851
-49.4911694101508
5% 10% 15% 20% 25%

Cost Of Capital

NPV Project A

2 3 4 5 6 7
$134 $134 $134 $134 $134 $0

NPV Project B

2737013838

178.604933727938

102.120680985676

40.6183556241427
0.026295107679857
5% 10% 15% 20% 25% 30%
Cost Of Capital

NPV Project B

flow
6 7
$850 -$180
$134 $0
$716 -$180
NPV Profiles for Both Projects

5% 10% 15% 15% 18% 20% 24%

Cost of Capital

NPV Project A NPV Project B

6 7
$850 -$180
$1,003.00

-$56.51
0 $2,824.26

6 7
$134 $0
$158.12

0 $1,493