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Expected Net Cash Flows Year Project A Project B 0 -$400 -$650 1 -528 210 2 -219 210 345 -150 210 1,100 210 820
Expected Net Cash Flows Year Project A Project B 0 -$400 -$650 1 -528 210 2 -219 210 345 -150 210 1,100 210 820 210 6 990 210 74 -325 210 a. Construct NPV profiles for Projects A and B. b. What is each project's IRR? c. If each project's 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 project's MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7 as the end of Project B's life.) e. What is the crossover rate, and what is its significance?
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