Question Details

FIN 534 Week 8 Homework Assignment 
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- IRR? (b) If each project- 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- MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7 as the end of Project B- life.) 
3. What is the crossover rate, and what is its significance?