# Cummings Products Co: NPV and IRR analysis for Project A and

Cummings 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

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

choice?

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

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

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

https://brainmass.com/business/capital-budgeting/cummings-products-co-npv-and-irr-analysis-for-project-a-and-339866

#### Solution Summary

This solution is comprised of a detailed explanation to construct NPV profiles for Projects A and B.