Problem 10 13 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 $280 $430 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 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 Project AProject BItem 6 Calculate the two projects' NPVs, if the 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 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 18 (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 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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Problem 10-13 NPV and IRR Analysis Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET

Problem 10-13 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	-$280	-$430
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 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-Project AProject BItem 6 Calculate the two projects' NPVs, if the 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
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 18%? (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. 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.