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4. NPV Profiles

e. explain the NPV profile, compare the NPV and IRR methods when evaluating independent and mutually exclusive projects, and describe the problems associated with each of the evaluation methods;

What is an NPV profile graph? A NPV profile is a graph showing the relationship between a project’s NPV and the firm’s cost of capital. The point where a project’s net present value profile crosses the horizontal axis indicates a project’s internal rate of return.