Part 2 - The second model is for a project for Gardial Fisheries. Gardial Fisheries is...

Part 2 -

The second model is for a project for Gardial Fisheries. Gardial Fisheries is considering two mutually exclusive investments. The projects’ expected net cash flows are as follows: Expected Net Cash Flows for the 7 year Project 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 has nonnormal cash 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

Expert Solution

NPV is the present value of future cash flows less the initial investment.

Since the projects are mutually exclusive, therefore project with higher NPV should be accepted.

jeff jeffy answered 1 year ago

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