Npv profile of two projects and calculate crossover rate

Assignment Help Financial Management

Reference no: EM131455931

A company is analyzing two mutually exclusive projects, S and L, whose cash flows are shown below: Years 0 1 2 3 4 S -1,100 900 350 50 10 L -1,100 0 300 500 850 The company's cost of capital is 10 percent, and it can get an unlimited amount of capital at that cost.

a. Calculate each project’s NPV and IRR. Which project would you choose based on each method?

b. Show the NPV profile of the two projects and calculate the crossover rate. Which method gives you the correct answer, NPV or IRR or both? Explain.

c. Calculate each project’s MIRR.

Which project would you choose? Explain why MIRR is better than IRR.

d. Use a data table to do a sensitivity analysis to see how cost of capital affects the IRR and MIRR of the two projects. Explain the intuition.

Reference no: EM131455931

Questions Cloud

Subsidiary to manufacture upholstery fabrics : Tarheel Furniture Company is planning to establish a wholly owned subsidiary to manufacture upholstery fabrics.

Calculate the company net profit margin : Calculate the company net profit margin.

Accumulated savings and additional annual savings needed : How much money will they have accumulated 30 years from now? If their goal is to retire with $710,000 of savings, how much extra do they need to save every year

How many dollars will cash management system free up : Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. how many dollars will the cash management system free up?

Npv profile of two projects and calculate crossover rate : Show the NPV profile of the two projects and calculate the crossover rate. Which method gives you the correct answer, NPV or IRR or both? Explain.

Incoming administration stated goal of keeping jobs : Use the incoming administration’s stated goal of keeping jobs in the US and how this will impact both the labor market and goods and services.

What is a disruptive agent of change : What is a "disruptive agent of change" and is this a quality that companies often seek in prospective CEOs?

What are the rates with continuous compounding : What are the rates with continuous compounding. What is the forward rate for the six-month period beginning in 18 months.

Equivalents will have what effect on operating cash flow : All else constant, an increase in cash and equivalents will have what effect on operating cash flow?

User Account

All Pages