NPV

PROJECT A PROJECT B
Year ACI PVF @ 10% PVCI Year
30.00 -30.00
1 5.00 1.1 4.55 1
2 10.00 1.21 8.26 2
3 15.00 1.331 11.27 3
4 20.00 1.4641 13.66 4
NPV 7.74

IRR
PROJECT A
19.0% 20.0%
Year ACI PVF @ 19% PVCI PVF @ 20%
1 5.00 0.840336134454 4.20 0.83333333333
2 10.00 0.706164818869 7.06 0.69444444444
3 15.00 0.593415814175 8.90 0.5787037037
4 20.00 0.498668751408 9.97 0.48225308642
30.14
COI 30.00
0.14
0.70
IRR = 19% + {[(20%-19%) x 0.14] / 0.70} =
IRR = 20% - {[(20%-19%) x 0.56] / 0.70} =

MIRR
PROJECT A PROJECT B
Year ACI Year ACI
-30.00 -30.00
1 5.00 1 20.00
2 10.00 2 10.00
3 15.00 3 8.00
4 20.00 4 6.00

MIRR = 16.50% MIRR = 15.57%

REGULAR PAYBACK PERIOD

 PROJECT A PROJECT B
Year ACI ACI to date Reg. Payback Period Year
1 5.00 5.00 1 1
2 10.00 15.00 1 2
3 15.00 30.00 1 3
4 20.00 50.00 4
3 years

DISCOUNTED PAYBACK PERIOD

PROJECT A

Year ACI PVF @ 10% PVCI PVCI to date

1 5.00 0.91 4.55 4.55

2 10.00 0.83 8.26 12.81
3 15.00 0.75 11.27 24.08
4 20.00 0.68 13.66 37.74
 PROJECT B
ACI PVF @ 10% PVCI
30.00 -30.00
20.00 1.1 18.18
10.00 1.21 8.26
8.00 1.331 6.01
6.00 1.4641 4.10
NPV 6.55

PROJECT B
22.5% 23.0%
PVCI Year ACI PVF @ 22.5% PVCI PVF @ 23%
4.17 1 20.00 0.8163265306122 16.33 0.813008130081301
6.94 2 10.00 0.6663890045814 6.66 0.660982219578293
8.68 3 8.00 0.543991024 4.35 0.537383918356336
9.65 4 6.00 0.444074305 2.66 0.436897494598647
29.44 30.01
30.00 COI 30.00
0.56 0.01
0.22
19.20% IRR = 22.5% + {[(23%-22.5%) x 0.01] / 0.22} =
19.20% IRR = 23% - {[(23%-22.5%) x 0.21] / 0.22} =
 PROJECT B
ACI ACI to date Reg. Payback Period
20.00 20.00 1
10.00 30.00 1
8.00 38.00
6.00 44.00
2 years

PROJECT B
Disc.
PVF @
Payback Year ACI PVCI
10%
Period
1 1 20.00 0.91 18.18
1 2 10.00 0.83 8.26
1 3 8.00 0.75 6.01
0.43 4 6.00 0.68 4.10
3.43 years
PVCI
16.26
6.61
4.30
2.62
29.79
30.00
0.21

22.52%
22.52%
 Disc.
PVCI to
Payback
date
Period
18.18 1
26.45 1
32.46 0.59
36.55
2.59 years
Answer: The two projects are both independent
and have both positive NPVs. Thus, they should
be both accepted.
Answer: If the two projects are both mutually exclusive,
the project that has higher NPV shoud be chosen.
Between the two projects, Project A should be chosen
since it has a higher NPV.
 PROJECT A PROJECT B WACC PROJECT A -
Year ACI ACI 8% $9.81
1 5.00 20.00 10% $7.74
2 10.00 10.00 12% $5.82
3 15.00 8.00 14% $4.05
4 20.00 6.00 16% $2.40
IRR-A 19.20% -$0.00
COI = 30.00 IRR-B 22.52% -$2.22

$9.81
$10.00
$7.85 $7.74
$6.55
$5.82
$5.34
$5.00 $4.19
$4.05
$3.
$2.
NPV

$0.00
0% 5% 10% 15%

-$5.00

WACC
 PROJECT B - NPV
$7.85
$6.55
$5.34
$4.19
$3.11
$1.51
-$0.00

PROJECT A - NPV
PROJECT B - NPV

$5.82
$5.34
$4.19
$4.05
$3.11
$2.40
$1.51

-$0.00 -$0.00
15% 20% 25%
-$2.22

Project A IRR = 19.20%

WACC Project B IRR = 22.52%
 PROJECT A PROJECT B WACC PROJECT A -
Year ACI ACI 8% $9.81
1 5.00 20.00 10% $7.74
2 10.00 10.00 12% $5.82
3 15.00 8.00 14% $4.05
4 20.00 6.00 16% $2.40
IRR-A 19.20% -$0.00
COI = 30.00 IRR-B 22.52% -$2.22

$9.81
$10.00
$7.85 $7.74
$6.55
$5.82
$5.34
$5.00 $4.19
$4.05
NPV

$0.00
0% 5% 10% 15%

-$5.00

WACC

Answer: We can see in the graph that Project A and Project B would meet approximately 14% WAC
is still the same. The company should still choose Project A. However, if the WACC is 15%, the r
choose Project B. That is because, below 14% WACC, Project A is a better choice as it has a highe
becomes Project B because it has the higher NPV
 PROJECT B - NPV
$7.85
$6.55
$5.34
$4.19
$3.11
$1.51
-$0.00

PROJECT A - NPV
PROJECT B - NPV

4
5
$5.82
$5.34
$4.19
$4.05
$3.11
$2.40
$1.51

-$0.00 -$0.00
% 15% 20% 25%
-$2.22

Project A IRR = 19.20%

WACC Project B IRR = 22.52%

pproximately 14% WACC. Thus, if the WACC is 5%, the recommendation

he WACC is 15%, the recommendation will change. The company must
choice as it has a higher NPV but above 14% WACC, the better choicece
e it has the higher NPV.
 PROJECT A PROJECT B WACC PROJECT A - NPV
Year ACI ACI 12.0000% $5.82
- 30.00 - 30.00 13.5252% $4.46
1 5.00 20.00 14.0000% $4.05
2 10.00 10.00
3 15.00 8.00
4 20.00 6.00

COI = 30.00
With a crossover rate of 13.5252%, both projects have the same
IRR than Project A. However, below the crossover rate, the deci
 PROJECT B - NPV PROJECT A - IRR PROJECT B - IRR
$5.34 19.19% 22.52% Project A has higher NPV but Project B has hig
$4.46 19.19% 22.52% Both projects have the same NPV
$4.19 19.19% 22.52% Poject B has higher NPV and IRR

2%, both projects have the same NPV. But above the crossover rate, we can choose Project B as it has a higher NPV and
below the crossover rate, the decision can be conflicting between NPV and IRR when evaluating both projects as mutually
exclusive.
 her NPV but Project B has higher IRR
ve the same NPV
her NPV and IRR

B as it has a higher NPV and

ing both projects as mutually