Question

NPV and IRR Analysis

Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows:

	EXPECTED NET CASH FLOWS
Year	Project A	Project B
0	-$280	-$430
1	-387	134
2	-193	134
3	-100	134
4	600	134
5	600	134
6	850	134
7	-180	134

2. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.
   
   Project A  %
   
   Project B  %
   
3. Calculate the two projects' NPVs, if you were told that each project's cost of capital was 10%. Do not round intermediate calculations. Round your answers to the nearest cent.
   
   Project A    $
   
   Project B    $
   
   Which project, if either, should be selected?
   -Select-Project AProject BItem 6
   
   Calculate the two projects' NPVs, if the cost of capital was 18%. Do not round intermediate calculations. Round your answers to the nearest cent.
   
   Project A    $
   
   Project B    $
   
   What would be the proper choice?
   -Select-Project AProject BItem 9
   
4. What is each project's MIRR at a cost of capital of 10%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places.
   
   Project A  %
   
   Project B  %
   
   What is each project's MIRR at a cost of capital of 18%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answer to two decimal places.
   
   Project A  %
   
   Project B  %
   
5. What is the crossover rate? Do not round intermediate calculations. Round your answer to two decimal places.
   %

Answer 1

b)	Project A	18.84%
	Project B	24.41%
c)	Project A	$         303.34
	Project B	$         222.37
	Select Project A
	Project A	$            22.66
	Project B	$            80.74
	Select project B
d)	Project A	14.41%
	Project B	16.75%
	Project A	18.44%
	Project B	20.94%
e)		14.12%