Question
Cummings Products is considering the two mutual exclusive investments whose expected net cash flows are: Year Project A Project B 0 $-400 $-650 1 -528
Cummings Products is considering the two mutual exclusive investments whose expected net cash flows are:
Year Project A Project B
0 $-400 $-650
1 -528 210
2 -219 210
3 -150 210
4 1,100 210
5 820 210
6 990 210
7 -325 210
A.) Construct NPV profiles for Projects A and B
B.) What is each Projects IRR?
C.) If each projects cost of capital were 10%, which project, if either, should be selected? If the cost of capital were 17%, what would be the proper choice?
d.) what is each projects MIRR at the cost of capital at 10%. At 17% (Hint: consider Period 7 as the end of the Project Bs life.)
e.) what is the crossover rate, and what is its significance.
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