NPV profile of two mutually exclusive projects.

Moulton Industries has two potential projects for the coming year, Project B-12 and Project F-4. The two projects are mutually exclusive. The cash flows are listed in the following table:

Draw the NPV profile of each project, and determine their crossover rate. If the appropriate hurdle rate is 8% for both projects, which project does Moulton Industries choose?

1.)

2.) What is the crossover rate for the two projects?

3.) If the appropriate hurdle rate is 8% for both projects, Moulton industries should choose project___?

(Click on the following icon in order to copy its contents into a spreadsheet.) Cash Flow Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Project B-12 - $4,200,000 $2,030,000 $2,030,000 $2,030,000 $0 $0 Project F-4 - $3,870,000 $0 $1,010,000 $1,600,000 $1,970,000 $2,410,000 OA OB. NPV in millions of dollars 3.5 3.03 2.5 2.0 1.5 1.03 0.5 0.0 -0.5 - 1.0 -1.5 -2.04 3.5 3.0 2.5 2.0 1.5 1.03 B-12 0.5 0.03 -0.5 -1.05 B-12 NPV in millions of dollars 4 6 18 10 12 14 16 18 20 ON 6 8 10 12 14 16 18 -1.5 -2.0 Discount rates (%) Discount rates (%) OC. OD. 3.53 TTTTTTTTA F-4 F 4 a MIA 3.52 3.0 2.5 2.0 1.5 1.0 NPV in millions of dollars B-12 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0- NPV in millions of dollars B-12 0.5 0.0 8 10 12 14 16 18 20 22 24 4 6 8 10 12 14 16 18 -0.5 -1.03 -1.5 -2.0 Discount rates (%) Discount rates (%)