NPV and IRR Analysis Cummings Products is considering two mutually exclusive investments whose expected net cash flows are as follows: Expected Net Cash Flows Year Project A Project B 0 -$350 -$620 1 -528 210 2 -219 210 3 -150 210 4 1,100 210 5 820 210 6 990 210 7 -325 210 a. Select the correct graph for NPV profiles for Projects A and B. A B D VPVS) 1 1400 VPVC) 14001 1 2007 VPVS) 1 1400 VPVS) 1 1400 1200 1 200 1200 1000 1000 1000 1000+ 800 N 800- Project A 800 Project A Project A 800 Project B 6001 600+ 600+ 600+ 4001 Project B 400 4007 Project B 4007 Project A 2007 200 Project B 2007 2001 25 30 -5 5 -2007 costof capilar og5 20 25 30 -200 cost of coloro5 20 5 -2007 cost of cat lover45 20 cost of cabianco45 20 -2007 -400 -4001 -4001 -4001 The correct graph is -Select- b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: % c. Calculate the two projects' NPVs, if each project's cost of capital were 10%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ Which project, if either, should be selected? -Select- should be selected. Calculate the two projects' NPVs, if each project's cost of capital were 18%. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ What would be the proper choice? -Select- is the proper choice. d. What is each project's MIRR at a cost of capital of 10%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B: % What is each project's MIRR at a cost of capital of 18%? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places. Project A: % % Project B: e. What is the crossover rate? Do not round intermediate calculations. Round your answer to two decimal places. % What is its significance? I. If the cost of capital is less than the crossover rate, both the NPV and IRR methods lead to the same project selections. II. The crossover rate has no significance in capital budgeting analysis. III. If the cost of capital is greater than the crossover rate, both the NPV and IRR methods will lead to the same project selection. -Select