complete the problem 10-25 using build a- model SS provided

K B D F G J 1 Gardial Fisheries is considering two tually exclusive investments. The projects' expected net cash flows are as 2 follows: 3 Expected net cash flows 4 Time Project A Project B 5 0 (5375) ($575) 6 1 (S300) S290 7 (S200) S190 3 ($100) S190 9 4 S600 $190 10 5 S600 $190 11 6 $926 $190 12 7 ($200) SO 13 14 a. If you were told that each project's cost of capital was 12 percent, which project should be selected? If the cost of 15 capital was 18 percent, what would be the proper choice? 16 17 WACC - 1296 WACC 1896 Use Excel's NPV function as explained in "Ch 10 18 Tool Kita". Note that the range does not 19 NPVA include the costs, which are added separately NPVA 20 21 NPVB- NPVB 22 23 At a cost of capital of 1296, Project A should be selected. However, if the cost of capital rises to 18%, then the choice is 24 reversed, and Project B should be accepted. 25 26 . Construct NPV profiles for Projects A and B. 27 28 Before we can graph the NPV profiles for these projects, we must create a data table of project NPV relative to differing costs of 29 capital BD $ S0.00 31 32 33 34 35 36 37 38 Project A Project B s0.00 $0.00 $0.00 S0.00 $0.00 S0.00 $0.00 50.00 S0.00 $0.00 S0.00 50.00 $0.00 $1 $1 096 296 496 696 890 1096 Project $1 SI Focus O H rch O W m Font 5. Paragraph Styles 28 Before we can graph the NPV profiles for the projects, we must creates data tahle of project NPV relative to co 29 capital. 30 31 Project A Project B 32 30.00 $0.00 31 33 096 S0.00 $0.00 34 296 $0.00 $0.00 $1 35 496 $0.00 $0.00 51 Project A 36 696 $0.00 $0.00 37 $0.00 896 $1 S0.00 38 1096 S0.00 $0.00 $1 39 1296 $0.00 S0.00 51 40 1496 $0.00 S0.00 So 41 1696 $0.00 $0.00 Projects so 1896 42 $0.00 S0.00 43 2096 $0.00 S0.00 50 44 2296 $0.00 S0.00 30 45 2496 $0.00 S0.00 sa 46 2696 $0.00 S0.00 09 556 1046 1396 2006 2514 47 305 355 2896 $0.00 S0.00 49 3096 S0.00 S0.00 49 50. What is each project's IRR? 51. We find the internal rate of return with Excel's TRR function 52 RR Note in the graph above that the X-axis Intercepts are equal to the two projects IRRS. 53 IRR 54 55 d. What is the crossover rate, and what is its significance? 56 57 Cash flon 58 Time differential 59 0 60 1 61 2 Crossover rate 62 3 63 4 The crossover rate represents the cost of capital at which the two projects 64 5 have the same met present value. In this scenario, that come present 65 6 value, at a cost of capital of 13.1396, is: 56 7 Focus W to search 0 MERRA 58 e. What is each project's MIRR at a cost of capital of 12 percent? Atr-18967 (Hint: Consider Period to be del Project 69 B's life.) 70 71 1296 cost of capital a 1896 cost of capital 72 73 MIRRA 74 MIRRS MIRR 75 76 77 78 L What is the regular payback period for these two projects? 79 80 Project 81 Time period: 0 1 2 3 4 5 6 82 Cashflow: (375) (300) (200) (100) 600 $600 $926 (8200) 83 Cumulative cash flow: 84% of year required for payback: 85 Max Ron 93-Payback: 0.000 86 87 88 89 Project 90 Time period: 0 1 2 3 4 5 6 7 91 Cashflow: (575) 190 190 190 190 S190 $190 So 92 Cumulative cash flow! 93% of year required for payback: 94 Payback: 0.000 95 96 sendelf1906 what is the data are the mande Focus 97- re to search O w 19 1 Normal No Spacing Heading 1 Headin TI Font (100) 6 S926 7 (S200) Paragraph Styles 97 At a cost of capital of 1296, what is the discounted payback period for these two projects? 98 99 WACC - 1296 100 101 Project 102 Time periode 0 1 2 3 4 5 103 Cash flow (375) (300) (200) 600 S600 104 Disc, cash flow: 105 Disc, cuni, cash flow 106 96 of year required for payback: 107 Discounted Payback: 0.000 108 109 110 Proiect 111 Time period: 0 1 2 3 4 5 112 Cash flow: (575) 190 190 190 190 $190 113 Disc, cash flow: 114 Disc. cum cash flow: 115 96 of year required for payback: 116 Discounted Payback: 0.000 117 6 $190 7 SO 118 119 L. What is the profitability index for each project if the cost of capital is 12 percent? 120 121 PV of future cash flows for A: 122 PI of A: 123 124 PV of future cash flows for B: 125 PI of B: 1761 D38 ere to search O O