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Your division is considering two investment projects, each of which requires an up - front expenditure of $ 1 0 million. You estimate that the

Your division is considering two investment projects, each of which requires an up-front expenditure of $10 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows:
Year: Project N Project M
1 $1 million $4 million
2 $2 million $3 million
3 $3 million $2 million
4 $4 million $2 million
5 $5 million $2 million
d. If the two projects are mutually exclusive and the cost of capital is 8%, which project should the firm undertake?
e. What is the crossover rate?
f. If the cost of capital is 8%, what is the modified (MIRR) of each project?

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