What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: Calculate the two projects' NPVS, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Which project, if either, should be selected? v should be selected. -Select- Calculate the two projects' NPVS, if each project's cost of capital was 16%. Do not round intermediate calculations. Round your answers to the nearest cent.
What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: Calculate the two projects' NPVS, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Which project, if either, should be selected? v should be selected. -Select- Calculate the two projects' NPVS, if each project's cost of capital was 16%. Do not round intermediate calculations. Round your answers to the nearest cent.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places.
Project A:
%
Project B:
%
c. Calculate the two projects' NPVS, if each project's cost of capital was 11%. Do not round intermediate calculations. Round your answers to the nearest cent.
Project A: $
Project B: $
Which project, if either, should be selected?
-Select-
v should be selected.
Calculate the two projects' NPVS, if each project's cost of capital was 16%. Do not round intermediate calculations. Round your answers to the nearest cent.
Project A: $
Project B: $
What would be the proper choice?
-Select- vis the proper choice.
d. What is each project's MIRR at a cost of capital of 11%? (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 16%? (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:
e. What is the crossover rate? Do not round intermediate calculations. Round your ansvwer to two decimal places.
What is its significance?
I. The crossover rate has no significance in capital budgeting analysis.
II. If the cost of capital is greater than the crossover rate, both the NPV and IRR methods will lead to the same project selection.
III. If the cost of capital is less than the crossover rate, both the NPV and IRR methods lead to the same project selections.
-Select- V
Transcribed Image Text: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
-$430
-$680
1
-528
210
2
-219
210
3
-150
210
4
1,100
210
820
210
6
990
210
7
-325
210
a. Construct NPV profiles for Projects A and B.
Select the correct graph.
A
B
D
VPVS)
1400-
VPVS) I
1400-
VPS)
1400-
VPVS)
1400-
1200-
1200A
1200-
1200
1000
1000
1000
1000
800-
800
800
800
Project A
Project B
Project A
Project A
600
600
600
600
400
400
400
400
200-
Project B
Project A
Project B
-
200
200
200-
Project B
+....
Cost of cabar
so
Costof cabiar5
-5
Cost of capita
10
20
25
-5
10
20
25
-5
10 va15
20
25
30
-5
Cost of catal
20 25 30
-200
-200
-200
-200
-400
-400
-400
-4001
The correct graph is -Select- v
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