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 $290 $400 1 387 134 2 193 134 3 100 134 4 600 134 5 600 134 6 850 134 7 180 134 Construct NPV profiles for Projects A and B Select the correct graph The correct graph is Select ABCDItem 1 Select IIIIIIItem 15 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 you were told that each project's cost of capital was 14 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 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 Project AProject BItem 9 What is each project's MIRR at a cost of capital of 14 (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 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 ompany is considering two mutually exclusive investments whose expected net cash flows are as follows ET CASH FLOWS Project B t $400 134 134 134 134 134 134 134 for Projects A and B NPV(S) I 5 800 Project A 600 400 200 2007 400f Project B 5 10 Cost of capital ( ) 15 25 NPV(S) 5 800 600 400 200 200 4001 Project B Project A B 15 5 10 Cost of capital ( ) RR Do not round intermediate calculations Round your answers to two decimal places NPV(3) 5 800 600 400 200 Project A 2001 400 Project B 10 5 Cost of capi 15 20 25 NPV(5) 800 600 400 5 200 Project B 5 10 15 Cost of capital ( ) 200 400 Project A 20 25

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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	-$290	-$400
1	-387	134
2	-193	134
3	-100	134
4	600	134
5	600	134
6	850	134
7	-180	134

Construct NPV profiles for Projects A and B.

Select the correct graph.

The correct graph is -Select-ABCDItem 1 .

-Select-IIIIIIItem 15

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 you were told that each project's cost of capital was 14%. 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 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-Project AProject BItem 9
What is each project's MIRR at a cost of capital of 14%? (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 %
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.

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ompany is considering two mutually exclusive investments whose expected net cash flows are as follows: ET CASH FLOWS Project B t- -$400 134 134 134 134 134 134 134 for Projects A and B. NPV(S) I -5 800+ Project A 600- 400+ 200+ -2007 -400f Project B 5 10 Cost of capital (%) 15 25 NPV(S) -5 800- 600- 400 200 -200 -4001 Project B Project A B 15 5 10 Cost of capital (%) RR? Do not round intermediate calculations. Round your answers to two decimal places. NPV(3) -5 800 600 400 200 Project A -2001 -400 Project B 10 5 Cost of capi 15 20 25 NPV(5) 800+ 600 400- -5 200+ Project B 5 10 15 Cost of capital (%) -200 + -400 Project A 20 25