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The second model isfora project forGardialFisheries.GardialFisheriesis considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows for
The second model isfora project forGardialFisheries.GardialFisheriesis considering two mutually exclusive investments. The projects' expected net cash flows are as follows: Expected Net Cash Flows for the 7yearProject are:
Project A $375, 300, 200, 100, 600, 600, 926 and, 200
Project B $575, 190, 190, 190, 190, 190, 190 and, 0
- If each project's cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice?
- Construct NPV profiles for Projects A and B.
- What is each project's IRR?
- What is the crossover rate, and what is its significance?
- What is each project's MIRR at a cost of capital of 12%? At r 18%? (Hint: Consider Period 7 as the end of Project B's life.)
- What is the regular payback period for these two projects? (Hint: Excel's PERCENTRANK function may not work correctly for Project A because it hasnonnormalcash flows.)
- At a cost of capital of 12%, what is the discounted payback period for these two projects?
- What is the profitability index for each project if the cost of capital is 12
Please help with showing the formulas for a better understanding. Thank you!
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