14. The following are the cash flows for two mutually exclusive projects under consideration. The projects are considered average risk projects. The companys WACC is 16 percent.

Year 0 Year 1 Year 2 Year 3 Year 4

Cash flows of A (14,000) 10,000 8,000 6,000 3,000

Cash flows of B (12,500) 4,000 6,000 9,000 9,750

1. Determine the IRR values for the two projects.
2. Draw a figure of NPV profiles and show which project creates more value at the firms cost of capital. (Figures dont have to be exact, use discount rates of 10%, 15%, 20%, and 25%. Consistency in the graph expected.)
3. Determine the exact cross-over rate.