Calculate the exact crossover point between project a and b

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Assignment- Capital Budgeting Part 1

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You are considering the following three projects. A &B are mutually exclusive while C is independent.

Following are their expected cash flows

year

project A

Project B

Project C

0

-60,000.00

-40,000.00

-20,000.00

1

0

40,000.00

35,000.00

2

82,000.00

40,000.00

30,000.00

3

60,000.00

20,000.00

2,000.00

4

20,000.00

10,000.00

-40,000.00

Assuming no capitol rationing a required rate of return (cost of capital) of 11% for all three projects.

1) Calculate NPV for each project.
2) Calculate IRR(s) for each project.
3) Calculate PI for each project.
4) Using cost of capital, as a financing and reinvestment rate, calculate MIRR for each project.
5) If A&B profiles cross, calculate the exact crossover point between project A & B.
6) Which of the three projects, if any, should be accepted and why?

Reference no: EM131230062

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