. Simson and Simpson, Inc. with its WACC of 10% has twoinvestment proposals with the following characteristics:
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???PROJECT A???PROJECT B
?__________________________??_________________________
?Period ICO Cash Flows ICO Cash Flows
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? 0?? $(9,000)? -?$(12,000)? -
? 1???$5,000? $5,000
? 2???$4,000? $5,000
? 3???$3,000? ? $8,000
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(A).?Compute the internal rate of return for Projects A &B. (5)
(B).?On a graph draw the net present value profiles for eachproject using 5 discount rates. (5)
(C).?Identify the crossover point. What is the significance ofthis point? Which project should be accepted, why? (5)
(D).?Explain the difference between incremental cost andopportunity cost. What are sunk costs and should we consider ?themwhen making capital budgeting decisions? Why
