Cummings Products is considering two mutually exclusive investments whose expected net cash flows are as...
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Cummings Products is considering two mutually exclusive investments whose 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 | 600 | 134 |
| 5 | 600 | 134 |
| 6 | 850 | 134 |
| 7 | -180 | 0 |
Calculate the two projects NPVs, IRRs, MIRRs, PIs assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
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