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Gardial Fisheries is considering two manually exclusive investments. The projects’ anticipated 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 chosen?  If the cost of capital is 18%, what project is the proper choice?

b. Create NPV profiles for Project A and B.

c. What is each project’s IRR?

d. What is crossover rate, and what is its importance?

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 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 profitability index for each project if cost of capital is?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91700

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