Question: Cummings Products is considering two mutually exclusive investments whose expected net cash flows are as follows: a. Construct NPV profiles for Projects A and B.b.

Cummings Products is considering two mutually exclusive investments whose expected net cash flows are as follows:

a. Construct NPV profiles for Projects A and B.b. What is each project's IRR?c. If you were told that each project's cost of capital was 10%, which project, if either, should be selected? If the cost of capital were 17%, what would be the proper choice?d. 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.)e. What is the crossover rate, and what is itssignificance?

EXPECTED NET CASH FLOWS Year Project A Project B -$300 -$405 -387 134 1 -193 134 3 -100 134 600 134 4 5 600 134 134 850 -180

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a b IRR A 181 IRRB 240 c At r 10 Project A has the greater NPV specifically 28334 as compared to Pro... View full answer

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