Reference no: EM133591858
Assignment
Textbook: Corporate Finance: A Focused Approach. Chapter 10. The Basics of Capital Budgeting: Evaluating Cash Flows Spreadsheet Problem.
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Expected Net Cash Flows
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Year
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Project A
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Project B
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0
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-$375
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-$575
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1
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-300
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190
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2
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-200
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190
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3
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-100
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190
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4
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600
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190
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5
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600
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190
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6
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926
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190
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7
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-200
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0
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Question 1. 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?
Question 2. Construct NPV profiles for Projects A and B.
Question 3. What is each project's IRR?
Question 4. What is the crossover rate, and what is its significance?
Question 5. 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.)
Question 6. What is the regular payback period for these two projects?
Question 7. At a cost of capital of 12%, what is the discounted payback period for these two projects?
Question 8. What is the profitability index for each project if the cost of capital is 12%?
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