Question: There are two projects that the company is considering: Project A costs 10,000 to implement today, and it brings subsequent cash flows of 5,000 at

There are two projects that the company is considering:

Project A costs 10,000 to implement today, and it brings subsequent cash flows of 5,000 at the end of year 1; 4,000 at the end of year 2; 6,000 at the end of year 3.

Project B's initial cost is 12,000, and subsequent cash flows are 6,000 per year for 3 years.

WACC is 8% for both projects.

a. Calculate NPV and IRR for each project, and decide which one to recommend.

b. Calculate MIRR for projects A and B. Which project would you recommend based on MIRR?

c. Find the crossover rate. What does this rate represent? Describe in one sentence.

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