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 Year Project A Project B 0 $340 $630 1 528 210 2 219 210 3 150 210 4 1,100 210 5 820 210 6 990 210 7 325 210 Select the correct graph for NPV profiles for Projects A and B The correct graph is Select graph Agraph Bgraph Cgraph DItem 1 What is each project's IRR Do not round intermediate calculations Round your answers to two decimal places Project A Project B 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 18 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 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 18 ( 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 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

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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

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
Year	Project A	Project B
0	-$340	-$630
1	-528	210
2	-219	210
3	-150	210
4	1,100	210
5	820	210
6	990	210
7	-325	210

Select the correct graph for NPV profiles for Projects A and B.

The correct graph is -Select-graph Agraph Bgraph Cgraph DItem 1 .
What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.
Project A: %

Project B: %
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 18%. 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.
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 18%? (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 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.