Explore BrainMass

Explore BrainMass

    evaluate cost of capital, NPV, IRR

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please see attached file:

    Gardial Fisheries is considering two mutally exclusive ingestments. The projects expected cash flow are as follows:

    Expected Net Cash Flow
    Year Projected A Projected 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 you were told that each projects's cost of capital was 12%, which project should be selected? If the cost of capital was 18%, what would be the proper choice?
    b) Construct NPV profiles for 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 Peroid 7 as the end of Project B's life)
    f) What is the regular payback for those two projects?
    g) At a cost of capital of 12%, what is the discounted payback period for these two projects?

    © BrainMass Inc. brainmass.com June 3, 2020, 9:44 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/evaluate-cost-of-capital-npv-irr-196582

    Attachments

    Solution Preview

    Expected Net Cash Flow

    Year Projected A Projected 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 you were told that each projects's cost of capital was ...

    Solution Summary

    This explains the steps to evaluate cost of capital, NPV, IRR

    $2.19

    ADVERTISEMENT