1. Cha Young Products Company is considering two mutually exclusive investments. The projects’ expected net cash flows are as follows: Expected Net Cash Flows Year Project A Project B 0 ($300) ($405)...

1. Cha Young Products Company is considering two mutually exclusive investments. The projects’ expected net cash flows are as follows:

Expected Net Cash Flows

Year Project A Project B

0 ($300) ($405)

1 (387) 134

2 (193) 134

3 (100) 134

4 600 134

5 600 134

6 850 134

7 (180) 0

a. Construct NPV profiles for Projects A and B.

b. What is each project’s IRR?

c. If you were told that each project’s cost of capital was 10%, which project

d. should be selected? If the cost of capital was 17%, what would be the proper

e. choice?

f. What is each project’s MIRR at a cost of capital of 10%? At 17%? (Hint:

g. Consider Period 7 as the end of Project B’s life.)

h. What is the crossover rate, and what is its significance?