1. Cummings Products Company's cost of capital is 15% and the company is considering two mutually exclusive projects. The projects' expected cash flows are as follows:
0
1
2
3
4
5
6
Project A
-550
160
160
160
160
160
160
Project B
-875
450
350
250
150
50
0
a. What are the two projects
1. Cummings Products Company's cost of capital is 15% and the company is considering two mutually exclusive projects. The projects' expected cash flows are as follows:
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a. What are the two projects
Related questions
Cummings Products Company is considering two mutually exclusive investments whose expected net cash flows are as follows:
| Year | Project A | Project B |
| 0 | ($690) | ($450) |
| 1 | 300 | 290 |
| 2 | 310 | 290 |
| 3 | 320 | 290 |
| 4 | 330 | 290 |
| 5 | 340 | 290 |
| 6 | 350 | 290 |
| 7 | 360 | 290 |
| 8 | 370 | 290 |
e. What is the crossover rate? SHOW YOUR WORK AND EXPLAIN YOUR ANSWER
Mario Brothers, a game manufacturer, has a new idea for an adventure game. It can market the game as a traditional board game or as an interactive CD-ROM, but not both. Consider the following cash flows of the two mutually exclusive projects for Mario Brothers. Assume the discount rate for Mario Brothers is 12 percent.
| Year | Board Game | CD-ROM | ||||
| 0 | â$ | 950 | â$ | 2,200 | ||
| 1 | 640 | 1,500 | ||||
| 2 | 650 | 1,250 | ||||
| 3 | 160 | 550 | ||||
| a. | What is the payback period for each project? (Do not round intermediate calculations and round your final answers to 2 decimal places (e.g., 32.16).) |
| Payback period | |
| Board game | years |
| CD-ROM | years |
