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.

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 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?
d. What is each project's MIRR at the cost of capital of 10%? At 17%?
e. What is the crossover rate, and what is its significance?

EXPECTED NET CASH FLOWS Project A -$400 -528 -219 -150 1,100 Year Project B -$650 210 210 210 210 210 210 210 0 4 820 6 990 -325

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a r NPV A NPV B 00 1288 820 100 479 372 120 366 308 148 228 229 180 94 150 207 0 94 258 150 0 300 245 62 b IRRA 207 IRRB 258 c At r 10 Project A has t... View full answer

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