Question

5. You are analyzing the following two mutually exclusive projects and have developed the following information. What is the crossover rate?

	Project A	Project B
YEAR	Cash Flow	Cash Flow
0	$-75,000	$-75,000
1	$24,800	$22,000
2	$29,500	$27,500
3	$43,500	$51,300

Answer 1

B Ε Difference in cash flows 2 3 year 0 1 2 $0 C Project B Cash flows -$75,000 $22,000 $27,500 $51,300 Project A Cash flows $75,000 $24,800 $29,500 $43,500 $2,800 $2,000 -$7,800 34.97% Cross-over rate IRR(D3:06)