# FIN 534 – Homework Set #4

Directions: Answer the following questions on a separate document. Explain how you reached the answer

or show your work if a mathematical calculation is needed, or both. Submit your assignment using the

assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 3:

Assume you are presented with the following mutually exclusive investments whose expected net cash

flows are as follows:

EXPECTED NET CASH FLOWS:

Year Project A Project B

0 −$400 −$650

1 −528 210

2 −219 210

3 −150 210

4 1,100 210

5 820 210

6 990 210

7 −325 210

1. (a) What is each project’s IRR?

(b) If each project’s cost of capital were 10%, which project, if either, should be selected? If the

cost of capital were 17%, what would be the proper choice?

2. (a) What is each project’s MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7

as the end of Project B’s life.)

3. What is the crossover rate, and what is its significance

or show your work if a mathematical calculation is needed, or both. Submit your assignment using the

assignment link in the course shell. This homework assignment is worth 100 points.

Use the following information for Questions 1 through 3:

Assume you are presented with the following mutually exclusive investments whose expected net cash

flows are as follows:

EXPECTED NET CASH FLOWS:

Year Project A Project B

0 −$400 −$650

1 −528 210

2 −219 210

3 −150 210

4 1,100 210

5 820 210

6 990 210

7 −325 210

1. (a) What is each project’s IRR?

(b) If each project’s cost of capital were 10%, which project, if either, should be selected? If the

cost of capital were 17%, what would be the proper choice?

2. (a) What is each project’s MIRR at the cost of capital of 10%? At 17%? (Hint: Consider Period 7

as the end of Project B’s life.)

3. What is the crossover rate, and what is its significance

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