1) Between project A and project B, which project should be accepted and why?

2) What is the exact NPV profile's crossover rate (incremental IRR)? And what is the relevance of this rate?

B E F H YEAR 1 PROJECT A 2 3 4 Sales 5 Operating cost 5 Depreciation 7 Project before Tax 3 Tax @ 21% Net Income 0 Add back Depreciation 1 Operating Cashflows 2 Initial Cashflow 3 Net working capital 4 Salvage value 5 Total Cashflow 6 PVF @ 13% (ie. 11%+2%) 7 PV of Cashflows 8 NPV 0 1 2 3 4 5 6 $ 2,050,000.00 $ 2,111,500.00 $ 2,174,845.00 $ 2,240,090.35 $ 2,307,293.06 $ 2,376,511.85 $ (950,000.00) $ (978,500.00) $(1,007,855.00) $ (1,038,090.65) $ (1,069,233.37) $(1,101,310.37) $ (428,700.00) $ (734,700.00) $ (524,700.00) $ (374,700.00) $ (267,600.00) $ (267,600.00) $ 671,300.00 $ 398,300.00 $ 642,290.00 $ 827,299.70 $ 970,459.69 $ 1,007,601.48 $ (140,973.00) $ (83,643.00) $ (134,880.90) $ (173,732.94) $ (203,796.54) $ (211,596.31) $ 530,327.00 $ 314,657.00 $ 507,409.10 $ 653,566.76 $ 766,663.16 $ 796,005.17 $ 428,700.00 $ 734,700.00 $ 524,700.00 $ 374,700.00 $ 267,600.00 $ 267,600.00 $ 959,027.00 $ 1,049,357.00 $ 1,032,109.10 $ 1,028,266.76 $ 1,034,263.16 $ 1,063,605.17 $ (3,000,000.00) $ (285,000.00) $ 285,000.00 $ 262,044.00 $ (3,285,000.00) $ 959,027.00 $1,049,357.00 $ 1,032,109.10 $ 1,028,266.76 $ 1,034,263.16 $ 1,610,649.17 1.0000 0.8850 0.7831 0.6931 0.6133 0.5428 0.4803 $ (3,285,000.00) $ 848,696.46 $ 821,800.45 $ 715,303.38 $ 630,655.26 $ 561,356.60 $ 773,624.64 $ 1,066,436.80 23.30% 9 IRR CO PI 2.04 PROJECT B Sales Operating cost Depreciation Project before Tax Tax @ 21% Net Income Add back Depreciation 1 Operating Cashflows 2 Initial Cashflow Net working capital Salvage value 5 Total Cashflow 5 PVF @ 13% (ie. 11%+2%) 7 PV of Cashflows B NPV YEAR 0 1 2 3 4 5 6 $1,000,000.00 $ 1,040,000.00 $ 1,081,600.00 $ 1,124,864.00 $ 1,169,858.56 $ 1,216,652.90 $ (220,000.00) $ (228,800.00) $ (237,952.00) $ (247,470.08) $ (257,368.88) $ (267,663.64) $ (285,800.00) $ (489,800.00) $ (349,800.00) $ (249,800.00) $ (178,400.00) $ (178,400.00) $ 494,200.00 $ 321,400.00 $ 493,848.00 $ 627,593.92 $ 734,089.68 $ 770,589.26 $ (103,782.00) $ (67,494.00) $ (103,708.08) $ (131,794.72) $ (154,158.83) $ (161,823.75) $ 390,418.00 $ 253,906.00 $ 390,139.92 $ 495,799.20 $ 579,930.84 $ 608,765.52 $ 285,800.00 $ 489,800.00 $ 349,800.00 $ 249,800.00 $ 178,400.00 $ 178,400.00 $ 676,218.00 $ 743,706.00 $ 739,939.92 $ 745,599.20 $ 758,330.84 $ 787,165.52 $(2,000,000.00) $ (150,000.00) $ 150,000.00 $ 73,576.00 $(2,150,000.00) $ 676,218.00 $ 743,706.00 $ 739,939.92 $ 745,599.20 $ 758,330.84 $ 1,010,741.52 1.0000 0.8850 0.7831 0.6931 0.6133 0.5428 0.4803 $(2,150,000.00) $598,423.01 $ 582,430.89 $ 512,815.48 $ 457,289.95 $ 411,591.60 $ 485,477.88 $ 898,028.81 26.24% 2.17 9 IRR PI