Question: PLEASE HELP! Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project

PLEASE HELP!

PLEASE HELP! Cummings Products Company is considering two mutually exclusive investments whose

expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year

Project A Project B 0 -$340 -$630 1 -528 210 2 -219

Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows: EXPECTED NET CASH FLOWS Year Project A Project B 0 -$340 -$630 1 -528 210 2 -219 210 3 - 150 210 4 1,100 210 5 820 210 6 990 210 7 -325 210 a. Construct NPV profiles for Projects A and B. Select the correct graph. A B VPVS) 1 1400 VPVS) 1 1400 VPVS) T 1400 1 2001 1000+ 800 1200 1000 1200 1000 Project A 800 Project A 800 Project A 600 600 600 4001 400 Project B 4001 Project B 2007 200 Project B 200 -5 5. 10.15 20 25 30 -5 2015 20 25 30 -5 5 10 15 20 30 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 was 11%. 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 was 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 11%? (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

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