Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows:

	EXPECTED NET CASH FLOWS
Year	Project A		Project B
0	-$430		-$680
1	-528		210
2	-219		210
3	-150		210
4	1,100		210
5	820		210
6	990		210
7	-325		210

1. Construct NPV profiles for Projects A and B.

   Select the correct graph.

   The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 1 .

2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: %

   Project B: %

3. Calculate the two projects' NPVs, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent.

   Project A: $

   Project B: $

   Which project, if either, should be selected?

   -Select-Project AProject BItem 6 should be selected.

   Calculate the two projects' NPVs, if each project's cost of capital was 16%. Do not round intermediate calculations. Round your answers to the nearest cent.

   Project A: $

   Project B: $

   What would be the proper choice?

   -Select-Project AProject BItem 9 is the proper choice.

4. What is each project's MIRR at a cost of capital of 11%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: %

   Project B: %

   What is each project's MIRR at a cost of capital of 16%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.

   Project A: %

   Project B: %

5. What is the crossover rate? Do not round intermediate calculations. Round your answer to two decimal places.

   %

   What is its significance?

   I. If the cost of capital is less than the crossover rate, both the NPV and IRR methods lead to the same project selections. II. The crossover rate has no significance in capital budgeting analysis. III. If the cost of capital is greater than the crossover rate, both the NPV and IRR methods will lead to the same project selection. -Select-IIIIII

Select the correct graph. C A B VPVC 1400 VPVC) 14001 VPV (5) 1400 1200 1200 1000 1000+ 800 Project A/ B00 Pret A 1200+ 1000+ 800+ 600+ 4001 200 Project B 600f 600+ 400 400- Project A Paget B Project B 2007 2007 20 25 30 5 20 25 30 -5 -2007 Carter -5 -2007 -4001 Cost or calikara Corror Make 15 -200 4001 -4001 D VP (5) 14001 1200 1000+ 800 Project A 600+ 400 Pige B 2007 -5 -200 -4001 conter cambiar as 20