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Consider the cash flow estimates for the following two mutually exclusive projects: Project A Project B Year 0 -11,230 -11,400 Year 1 9,000 1,090 Year

Consider the cash flow estimates for the following two mutually exclusive projects:

Project A

Project B

Year 0

-11,230

-11,400

Year 1

9,000

1,090

Year 2

3,415

3,170

Year 3

1,120

3,980

Year 4

723

8,010

Construct a NPV profile chart for these projects (use estimates for the cost of capital from 0 to 30% in 5% increments). Find the IRR for each project. Which project would you select? Is your decision the same across all cost of capital estimates? If not at what point (cost of capital) does your decision change? What is the IRR of the difference in cash flows for these two projects? What causes this configuration of NPV profiles in this particular case? Find the MIRR for both projects at 5% and 10% costs of capital and determine which project you prefer using this method. How do your selection from the MIRR method compare to the NPV methods selections?

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