NPV and IRR Analysis Cummings Products Company is considering two mutually exclu
ID: 2778047 • Letter: N
Question
NPV and IRR Analysis
Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows:
Construct NPV profiles for Projects A and B.
Select the correct graph.
The correct graph is -Select-ABCDItem 1.
What is each project's IRR? Round your answers to two decimal places.
Project A %
Project B %
Calculate the two projects' NPVs, if you were told that each project's cost of capital was 10%. Round your answers to the nearest cent.
Project A $
Project B $
Which project, if either, should be selected?
-Project A or B?
Calculate the two projects' NPVs, if the cost of capital was 17%. Round your answers to the nearest cent.
Project A $
Project B $
What would be the proper choice?
Project A or B?
What is each project's MIRR at a cost of capital of 10%? (Hint: Note that B is a 6-year project.) Round your answers to two decimal places.
Project A %
Project B %
What is each project's MIRR at a cost of capital of 17%? (Hint: Note that B is a 6-year project.) Round your answer to two decimal places.
Project A %
Project B %
What is the crossover rate? Round your answer to two decimal places.
%
What is its significance?
-Select
I.If the cost of capital is less than the crossover rate, both the NPV and IRR methods lead to the same project selections.
II.The crossover rate has no significance in capital budgeting analysis.
III.If the cost of capital is greater than the crossover rate, both the NPV and IRR methods will lead to the same project selection.
Explanation / Answer
Answer: IRR:
NPV: if the cost of capital is 10%
NPV: If cost of capital is 17%.
EXPECTED NET CASH FLOWS Year Project A Project B 0 -300 -405 1 -387 134 2 -193 134 3 -100 134 4 600 134 5 600 134 6 850 134 7 -180 134 IRR 18% 27%Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.