CFIN6
Chapter 9 Spreadsheet Problem
Capital Budgeting Techniques
Use the model in File C09 to solve this problem.
West Coast Chemical Company (WCCC) is considering two mutually exclusive investments. The
projects’ expected net cash flows are as follows:
Expected Net Cash Flows
Year Project A Project B
0 $(45,000) $(50,000)
1 (20,000) 15,000
a. Construct NPV profiles for Projects A and B.
b. Calculate each project’s IRR.
d. At what rate do the NPV profiles of the two projects cross?
e. Project A has a large cash flow in Year 5 associated with ending the project. WCCC’s management
is confident of Project A’s cash flows in Years 0 to 4 but is uncertain about what its Year 5 cash