# evaluate cost of capital, NPV, IRR

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?

https://brainmass.com/business/capital-budgeting/evaluate-cost-of-capital-npv-irr-196582

#### 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