What is each projects mirr at the cost of capital of 10 at

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Reference no: EM13585670

Assume you are presented with the following mutually exclusive investments whose expected net cash flows are as follows:

EXPECTED NET CASH FLOWS:
Year                Project A               Project B
0                     -$400                   -$650
1                      -528                       210
2                      -219                       210
3                      -150                       210
4                     1,100                       210
5                        820                       210
6                        990                       210
7                      -325                        210

1. Construct NPV profiles for Projects A and B.
2. What is each project's IRR?
3. 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?
4. 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.)
5. What is the crossover rate, and what is its significance?

Reference no: EM13585670

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