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Start with the partial model n the file ch10 P23 build a model.xls on the textbook's web site. Gardial Fisheries is considering two manually exclusive investments. The projects' expected net cash flows are as follows:

Expected Net Cash Flows

Year Project A Project B

0 -$375 -$575

1 -300 190

2 -200 190

3 -100 190

4 600 190

5 600 190

6 926 190

7 -200 0

a. If each project's cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice?

b. Construct NPV profiles for Project A and B.

c. What is each project's IRR?

d. What is the crossover rate, and what is its significance?

e. What is each project's MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Projects B's life.)

f. What is the regular payback period for these two projects?

g. At a cost of capital of 12%, what is the discounted payback period for these two projects?

h. What is the profitability index for each project if the cost of capital is?

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Financial Accounting, Accounting

Category:- Financial Accounting
Reference No.:- M9717350

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