Dalton Products is considering two mutually exclusing investments whose expected net cash flows are as follows:
|
Expected Net Cash |
Flows |
| Year |
Project A |
Project B |
| 0 |
-$500 |
-$700 |
| 1 |
-565 |
220 |
| 2 |
-200 |
220 |
| 3 |
-140 |
220 |
| 4 |
1,200 |
220 |
| 5 |
830 |
220 |
| 6 |
950 |
220 |
| 7 |
-330 |
220 |
a. Construct NPV profiles for Projects A and B
b. What is each project's IRR?
c. If each project's cost of capital were 10%, which project, if either, should be selected?
d. What is each project's MIRR at the cost of capital of 10%? At 18%?