Question

Assume you are given these mutually exclusive investments with the expected net cash flows as in the table:

Year	Project A	Project B
0	-400.00	-670
1	-528.00	210
2	-219.00	210
3	-250.00	210
4	1100.00	210
5	820.00	210
6	990.00	210
7	-325.00	210

Respond to the questions:

Question 1:

• What is each project’s IRR?
• 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?

Question 2:

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.)

Question 3:

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

Please assist with answering question 3.

Answer 1