Calculate the weighted average cost of capital, Finance Basics

Company XYZ stock is considering the two new projects, Project A and Project B. The two projects have similar risk characteristics as the existing business. The managers forecast the following investment outlay and cash flows.

1. If Project A and Project B are independent, what is your recommendation on the projects?

2. How do you rank the two projects based on the following criteria:

(a) Regular payback and discounted payback

(b) NPV

(c) IRR

(d) Profitability index

3. If Project A and Project B are mutually exclusive, what is your recommendation?

4. If the WACC changes due to either Fed interest rate policy or the returns required by the investors, should your recommendations change?

Posted Date: 2/21/2013 7:20:23 AM | Location : United States

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