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Need answer to all, thanks! NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as
Need answer to all, thanks!
NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Project A Project B Year -$620 -$350 1 -528 210 2 -219 210 -150 210 4 1,100 210 5 820 210 6 990 210 7 -325 210 a. Construct NPV profiles for Projects A and B. Select the correct graph. B A PV(5) 1400 PS) PVS) 1400 1400 1200 1200 1200 1000 1000 1000 Project A Project A 800 Project A 800 800 600 600 600 400 Project B 400 400 Project B Project B 200 200 200 Costof caa5 Costof caia(5 20 25 30 5 ..15 Cost of catal 20 25 30 -5 20 -200 -400 -200 -400i -200 -4001 D PVS) 1400 1200 1000 Project B 800 600 400 Project A 200 -5 -200 -400 Costof calal520 The correct graph is -Select- . b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A Project B: % c. Calculate the two projects' NPVS, if each project's cost of capital was 10%. Do not round intermediate calculations. Round your answers to the nearest cent Project A: $ Project B: $ Which project, if either, should be selected? -Select-Sshould be selected Calculate the two projects' NPVS, if each project's cost of capital was 18%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ What would be the proper choice? -Select is the proper choice. d. What is each project's MIRR at a cost of capital of 10%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Roun your answers to two decimal places. Project A: Project B What is each project's MIRR at a cost of capital of 18%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Roun your answers to two decimal places. Project A Project B e. 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. -SelectStep by Step Solution
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