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3. Use the project cash flows for the two mutually exclusive projects shown to the right to answer the following Project A Project B Time
3. Use the project cash flows for the two mutually exclusive projects shown to the right to answer the following Project A Project B Time Cashflow Cashflow -$725 -$850 $100 $200 $250 $200 $250 $200 VOUAWN-O $200 $200 $100 $200 $100 $200 $100 $200 a. Graph the NPV profiles for both projects on a common chart, making sure that you identify all of the "crucial" points. (12.5 marks)b. For what range of possible interest rates would you want to use IRR to choose between these two projects? For what range of rates would you NOT want to use IRR? (12.5 marks) c. Assume that the expected cash flows for these two projects have been revised as shown to the right. Reconstruct the NPV profiles. (12 5 marks) Project A Project B Time Cashficat - 5/25 -5850 $100 $100 9250 $200 8200 6200 $100 $200$100 $200 5100 d. With the new expected cash flows shown to the right, is there still a range of possible interest rates where the 3-step decision process for choosing between mutually exclusive projects using IRR will accept the wrong project? Explain your answer. (12.5 marks)
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