Problemyour division is considering two investment projects, Ask an Expert

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Problem:

Your division is considering two investment projects, each of which requires an up-front expenditure of $24 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of dollars): Project A year 1 = 5, year 2 = 10, year 3= 15, year 4 = 20. Project B year 1 = 20, year 2 = 10, year 3 = 8, year 4= 6

Required:

Question 1: What is the regular payback period for each of the projects (years)?

Question 2: What is the discounted payback period for each of the projects (years)?

Question 3: What is the crossover rate?

Question 4: If the cost of capital is 8%, what is the modified IRR (MIRR) of each project?

Please justify your answer and also describe all workings.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91146654

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