EXPECTED NET CASH FLOWS Assignment

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in the course shell. This homework assignment is worth 100 points.
Use the following information for Questions 1 through 3:

Assume you are presented with the following mutually exclusive investments whose expected net cash flows are as follows:
EXPECTED NET CASH FLOWS:
Year
Project A
Project B
0
−$400
−$650
1
−528
210
2
−219
210
3
−150
210
4
1,100
210
5
820
210
6
990
210
7
−325
210
1. (a) What is each project’s IRR?
(b) If each project’s cost of capital were 10%, which project, if either, should be selected? If the cost of capital were 17%, what would be the proper choice?
2. (a) What is each project’s MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7 as the end of Project B’s life.)
3. What is the crossover rate, and what is its significance?
FIN 534 – Homework Set #4
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