Your division is considering two investment projects, each of which requires an up-front expenditure of $25 million. You estimate that the cost of capital is 11% and that the investments will produce the following after-tax cash flows (in millions of dollars):

Year Project A Project B

1 5 20

2 10 10

3 15 8

4 20 6

a. What is the regular payback period for each of the projects? Round your answers to two decimal places.

Project A: (years)

Project B: (years)

b. What is the discounted payback period for each of the projects? Round your answers to two decimal places.

Project A: (years)

Project B: (years)

c. If the two projects are independent and the cost of capital is 11%, which project or projects should the firm undertake?

d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake?

e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake?

f. What is the crossover rate? Round your answer to two decimal places.

e. If the cost of capital is 11%, what is the modified IRR (MIRR) of each project? Round your answers to two decimal places.

Project A: (%)

Project B: (%)