problem: Derek's Donuts is considering 2 mutually exclusive investments. The projects expected net cash flows are as follows:
Expected Net Cash Flows
Year

Project A

Project B

0

$(300)

$(405)

1

(387)

134

2

(193)

134

3

(100)

134

4

500

134

5

500

134

6

850

134

7

100

0

[A] Make NPV profiles for Projects A & B.
[B] Determine each project's IRR?
[C] If you were told that cash project's required rate of return was 12%, which project should be selected? If the required rate of return was 15%, what would be the proper choice?
[D] Looking at the NPV profiles constructed in part [A], what is the approximate crossover rate, & determines its significance?