Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 10 percent and that the investments will produce the following after-tax cash flows:
a. What is the regular payback period for each of the projects?

b. What is the discounted payback period for each of the projects?

c. If the 2 projects are independent and the cost of capital is 10 percent, which project or projects should the firm undertake?

d. If the two projects are mutually exclusive and the cost of capital is 5 percent, which project should the firm undertake?

e. If the two projects are mutually exclusive and the cost of capital is 15 percent, which project should the firm undertake?

f. What is the crossover rate?

g. If the cost of capital is 10 percent, what is the modified IRR (MIRR) of each project?

 
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