Capital Budgeting Question:

You are considering two mutually exclusive projects for potential investment. The cash flows for the two projects are given. For both projects, the required rate of return is 12%.

Year	Project A	Project B
0	($40,000)	($40,000)
1	$14,400	$0
2	$14,400	$0
3	$14,400	$0
4	$14,400	$70,000

Find the following:

1. The Net Present Value (NPV) .

2. The Internal Rate of Return (IRR) .

3. Use Excel to draw a graph of the NPV of these cash flows as a function of the discount rate (NPV Profile).

4. What is the value of cross over point?

5. What is your recommendation, which project the company shall choose? Explain the basis of your choice.