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:

Expected Net Cash Flows

Year Project A Project B

0 $375 $575

1 300 190

2 200 190

3 100 190

4 600 190

5 600 190

6 926 190

7 200 0

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%?

(Hint: Consider Period 7 as the end of Project B s life.)

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%?