Question

In: Finance

Assume you are given these mutually exclusive investments with the expected net cash flows as in...

Assume you are given these mutually exclusive investments with the expected net cash flows as in the table:

Year Project A Project B
0 -400.00 -670
1 -528.00 210
2 -219.00 210
3 -250.00 210
4 1100.00 210
5 820.00 210
6 990.00 210
7 -325.00 210

Respond to the questions:

Question 1:

  • What is each project’s IRR?
  • If each project’s cost of capital were 10%, which project, if either, should be selected? If the cost of capital were 17%, what would be the proper choice?

Question 2:

What is each project’s MIRR at the cost of capital of 10%? At 17%?

(Hint: Consider Period 7 as the end of Project B’s life.)

Question 3:

What is the crossover rate, and what is its significance?

Solutions

Expert Solution

jeff jeffy answered 3 weeks ago
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