Directions: Answer the following questions on a separate document. Explain how you reached the answer

or show your work if a mathematical calculation is needed, or both. Submit your assignment using the

assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 5:

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?