Question

You are considering the following two mutually exclusive projects. The crossover rate between these two projects is ___ percent and Project ___ should be accepted if the required return is greater than the crossover rate.

Year Project A Project B

0 −$43,000 −$43,000

1 21,500 13,760

2 13,500 11,500

3 13 ,500 26,000

Answer 1

Year A B Crossover 0 $(43,000.00) $(43,000.00 $ 1 $ 21,500.00 $ 13,760.00 $ 7,740.00 2 $ 13,500.00 $ 11,500.00 $ 2,000.00 3 $ 13,500.00 $ 26,000.00 $(12,500.00) 14.82% Year A B Crossover 0 -43000-43000 =B2-C2 1 21500 13760 =B3-C3 2 13500 11500 =B4-C4 3 13500 26000 =B5-C5 =IRR(D2:05) !

Project B