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Assume you are given these mutually exclusive investments with the expected net cash flows as in the...

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Finance

Assume you are giventhese mutually exclusive investments with the expected net cashflows as in the table:

YearProject AProject B
0-400.00-670
1-528.00210
2-219.00210
3-250.00210
41100.00210
5820.00210
6990.00210
7-325.00210

Respond to thequestions:

Question1:

  • What is each project’sIRR?
  • If each project’s cost ofcapital were 10%, which project, if either, should be selected? Ifthe cost of capital were 17%, what would be the proper choice?

Question2:

What is each project’sMIRR at the cost of capital of 10%? At 17%?

(Hint: Consider Period7 as the end of Project B’s life.)

Question3:

What is the crossoverrate, and what is its significance?

Answer & Explanation Solved by verified expert
4.2 Ratings (711 Votes)
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