The following are the cash flows for two mutually exclusive projects under consideration. The projects...
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The following are the cash flows for two mutually exclusive projects under consideration. The projects are considered average risk projects. The companys WACC is 16 percent. Year 0 Year 1 Year 2 Year 3 Year 4 Cash flows of A (14,000) 10,000 8,000 6,000 3,000 Cash flows of B (12,500) 4,000 6,000 9,000 9,750 a. Determine the IRR values for the two projects. b. Draw a figure of NPV profiles and show which project creates more value at the firms cost of capital. (Figures dont have to be exact, use discount rates of 10%, 15%, 20%, and 25%. Consistency in the graph expected.) c. Determine the exact cross-over rate.
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