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 less than the crossover rate. Year Project A Project B 0 −$45,000 −$45,000 1 21,500 13,780 2 13,500 11,500 3 13,500 26,200

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Answer 1

А B $0 2 Project A Project B Difference in cash flows Cash flows Cash flows -$45,000 -$45,000 $21,500 $13,780 $7,720 $13,500 $11,500 $2,000 $13,500 $26,200 -$12,700 Crossover rate 15.96% IRR(D4:07) Above the crossover point accept the project A and below crossover point accept Project B Answers: 15.96%; B