Question

A corporation is considering two mutually exclusive projects.

The projects have the following cash flows:

Project A | Project B | ||

YEAR | |||

0 | <$10,000> | <$8,000> | |

1 | 1,000 | 7,000 | |

2 | 2,000 | 1,000 | |

3 | 6,000 | 1,000 | |

4 | 6,000 | 1,000 |

At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?)

Answer #1

Anderson Associates is considering two mutually exclusive
projects that have the following cash flows: Project A Project B
Year Cash Flow Cash Flow 0 -$10,000 -$8,000 1 2,000 7,000 2 2,000
3,000 3 6,000 1,000 4 8,000 3,000
At what cost of capital do the two projects have the same net
present value? (That is, what is the crossover rate?) Enter your
answer rounded to two decimal places. Do not enter % in the answer
box. For example, if your...

Anderson Associates is considering two mutually exclusive
projects that have the following cash flows:
Project
A
Project B
Year
Cash
Flow
Cash Flow
0
-$11,000
-$9,000
1
1,500
6,000
2
3,000
4,000
3
5,000
3,000
4
9,000
2,000
At what cost of capital do the two projects have the same net
present value? (That is, what is the crossover rate?) Enter your
answer rounded to two decimal places. Do not...

Anderson Associates is considering two mutually exclusive
projects that have the following cash flows: Project A Project B
Year Cash Flow Cash Flow 0 -$11,000 -$9,000 1 3,500 6,000 2 3,000
4,000 3 5,000 3,000 4 9,000 2,000 At what cost of capital do the
two projects have the same net present value? (That is, what is the
crossover rate?) Enter your answer rounded to two decimal places.
Do not enter % in the answer box. For example, if your...

1. a) Anderson Associates is considering two mutually exclusive
projects that have the following cash flows:
Year
Project A Cash Flow
Project B Cash Flow
0
-$11,000
-$9,000
1
3,500
6,000
2
3,000
4,000
3
5,000
3,000
4
9,000
2,000
At what cost of capital do the two projects have the same net
present value?
b)
Ripken Iron Works believes the following probability
distribution exists for its stock. What is the standard deviation
of return on the company's stock?
State...

Gore Global is considering the two mutually exclusive projects
below. The cash flows from the projects are summarized below.
Year
ManBearPig Project Cash Flow
Flying Car Cash Flow
0
-$100,000
-$200,000
1
25,000
50,000
2
25,000
50,000
3
50,000
80,000
4
50,000
100,000
The two projects have the same risk. At what cost of capital would
the two projects have the same net present value (NPV)?
A.
10.03%
B.
-24.45%
C.
2.86%
D.
13.04%
E.
15.90%

You have to pick between three mutually exclusive projects with
the following cash flows to the firm: Year Project A Project B
Project C 0 -$10,000 $5,000 -$15,000 1 $8,000 $5,000 $10,000 2
$7,000 -$8,000 $10,000 The cost of capital is 12%. a. Which project
would you pick using the NPV rule? b. Which project would you pick
using the IRR rule? c. How would you explain the differences
between the two rules? Which one would you rely on to...

you are considering the following two mutually exclusive
projects. the require return in each project is 12 percent. which
project you should accept and what the best reason for the
decision?
year project A project B
0 -$10,000 -$ 20,000
1 3,000 5,000
2 8,000 7,000
3 4,000 12,000
4 $ 2,000 $ 10,000
A.project A because it pays back faster
B. project A because it has the higher profitability index
C.project B because it has the higher profitability index...

You are considering two mutually exclusive projects with the
following cash flows. Which project would you choose? (The
following is the only information you have. Don’t ask for more
because I don’t have any more information?) Hint: Find the
“crossover rate” to answer. PLEASE SHOW & EXPLAIN ALL WORK
Year
Project A
Project B
0
-240,000
-198,000
1
0
110,800
2
0
82,500
3
325,000
45,000

You are considering the following two
mutually exclusive projects with the following cash flows:
Project
A
Project B
Year Cash
Flow
Year Cash Flow
0
-$75,000
0 -$70,000
1
$19,000
1 $10,000
2
$48,000
2 $16,000
3
$12,000
3 $72,000
Required rate of
return
10
%
13 %
Calculate the NPV, IRR,...

Consider two mutually exclusive projects with the following cash
flows: Project A is a 6 year project with initial (time 0) cash
outflow of 40,000 and time 1 through 6 cash inflows of
8000,14000,13000,12000,11000,and 10000 respectively. Project B is a
3 year project with initial (time 0) cash outflow of 20,000 and
time 1 through 3 cash inflows of 7000,13000, and 12000
respectively. Assuming a 11.5% cost of capital compute the
crossover internal rate of return on the incremental cash...

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