1. Here are the two cash flow forecasts for two mutually exclusive projects. Find out each project's discounted payback, NPV, IRR, and MIRR at a cost of capital of 8.25%. What is the project's crossover rate? Graph the NPV profiles for the projects. At what interest rates will you prefer project B to A?
Time Project A Project B
0 (8500) (9500)
1 3600 3900
2 2400 2900
3 2850 2900
4 5200 5550
2. Machines J and K have the following investment and operating costs:
Year 0 1 2 3
J 11000 1200 1300
K 13000 1200 1300 1400
Which machine is a better buy at a WACC of 10.5%?