The Basics of capital Budgeting: NPv Profile NPV Profile A project's Npyv profae graph intersects the Y axs at o% cost of capital and intersects the x axis at the project's RR (where NPV o). The Y-axis intersection point represents the project's undiscounted NPv The point at which 2 projects' profiles cross one another is the crossover rate The crossover rate can be found by calculating the Dantad of the differences in the projects' cash flows (Project Deta). A steep NPv profile indicates that increases in the cost of capital lead to large declines in NPv If a project has most of its cash flows coming i later years, its NPV will decline sharply if the cost of capital increases; but a project whose cash flows come earlier will not be severely penalized by high capital costs. The significance of o the crossover rate is that at any cost of capital Coreater than the crossover rate, the NPv and IRR methods wil the same conclusion for evaluating mutually exclusive projects. However, at any cost of capital less the cross de that situation, the NPV method will always provide the correct project acceptance result. than rate, the NPV and IRR methods conclusions will conflict. In Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash sows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements and tax effects are all included in these cash fows. Both projects have 4-year sves, and they have risk characteristics similar to the firm's average project. Bellinger's wAcc is 12%. Project A 1,050 705 e What is Project Delta's IRR? Do not round intermediate calculations, Round your answer to two decimal places. what is the significance of this IRR? It is the lect ater this point when mutually exclusive projects are considered there is no conflict in project acceptance between the Npv Review the graphs below, select the graph that correcty represents the correct av profale for Projects A and B by using the following drop down menu. NPV Profiles A NPV Profiles B