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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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