Start with the partial model in the file Ch10 P23 Build a Model.xls on the textbooks Web

Question:

Start with the partial model in the file Ch10 P23 Build a Model.xls on the textbook’s Web site. Gardial Fisheries is considering two mutually exclusive investments. The projects’ expected net cash flows are as follows:

Year 12 34567 Expected Net Cash Flows Project A -$375 -300 -200 -100 600 600 926 -200 Project B -$575 8888888

a. If each project’s cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice?
b. Construct NPV profiles for Projects A and B.
c. What is each project’s IRR?
d. What is the crossover rate, and what is its significance?
e. What is each project’s MIRR at a cost of capital of 12%? At r = 18%?
f. What is the regular payback period for these two projects?
g. At a cost of capital of 12%, what is the discounted payback period for these two projects?
h. What is the profitability index for each project if the cost of capital is 12%?

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