Start with the partial model n the file ch10 P23 build a model.xls on the textbook's web site. Gardial Fisheries is considering two manually exclusive investments. The projects' expected net cash flows are as follows:
Expected Net Cash Flows
Year Project A Project B
0 -$375 -$575
1 -300 190
2 -200 190
3 -100 190
4 600 190
5 600 190
6 926 190
7 -200 0
a. If each project's cost of capital is 12%, which project should be selected? If the cost of capital is 18%, what project is the proper choice?
b. Construct NPV profiles for Project A and B.
c. What is each project's IRR?
d. What is the crossover rate, and what is its significance?
e. What is each project's MIRR at a cost of capital of 12%? At r = 18%? (Hint: Consider Period 7 as the end of Projects B's life.)
f. What is the regular payback period for these two projects?
g. At a cost of capital of 12%, what is the discounted payback period for these two projects?
h. What is the profitability index for each project if the cost of capital is?