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 0 -$300 -$405 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 a. Construct NPV profiles for Projects A and B. Select the correct graph. A B D NPVS) 1 NPV) NPVS) 1 MPVS) ! 800 Project A 800 Project B 8001 Project A 800N Project B 6007 600+ 600 600+ 400 400 400 400 200 200 2001 200 Project B Project A Project B Project A -5 5 15 20 25 20 25 15 25 25 10 Cost of capital -5 5 10 15 Cost of capital %) -2007 -5 5 10 Cost of capital -2007 -5 5 10 15 Cost of capital) -2007 -200 -4001 -4001 -4001 -4001 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 you were told that 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- Calculate the two projects' NPVs, if the cost of capital was 17%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A $ Project B What would be the proper choice? -Select- . 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. Round your answers to two decimal places. Project A % Project B % What is each project's MIRR at a cost of capital of 17%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answer 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. The crossover rate has no significance in capital budgeting analysis, II. If the cost of capital is greater than the crossover rate, both the NPV and IRR methods will lead to the same project selection. III. If the cost of capital is less than the crossover rate, both the NPV and IRR methods lead to the same project selections. -Select