Extra-credit problem (30 Points)
Instructions – Solve the following problems using Microsoft Excel, and submit your Excel File in D2L’s Dropbox .

Show your work in Excel. That is, computation has to be done in Excel and Excel functions that are used to complete the necessary output has to stay (saved) in Excel.

1. You are provided with the following cash flows on a project (15 Points).
Year Cash Flow to Firm  0 -6,000,000 1 3,000,000 2 2,500,000 3 3,250,000 4 1,000,000

a. Compute and plot the NPV profile for this project at discount rates ranging from 0% to 50%, at incremental rate of 2.5%.

b. What is the IRR of the project? Show the IRR for the project in the Excel file.

c. What is the modified IRR (MIRR) for the project if the cost of capital is 10%?
2. You are provided with the following cash flows for two projects (15 Points).
Year Project A Project A 0 -4,000,000 -4,000,000 1 2,000,000 1,000,000 2 1,500,000 1,500,000 3 1,250,000 1,700,000 4 1,000,000 2,400,000

a. Compute and plot the NPV profile for each project at discount rates ranging from 0% to 50%, at incremental rate of 2.5%.

b. Find the IRR of each project.

c. At discount rate of 10% which project would you choose?

d. What is a cross-over rate?

e. At a discount rate that is less than cross-over rate, which project would you choose?  f. At a discount rate that is greater than the cross-over rate, which project would you choose?