Question

Project A has initial cost of $50,000, and annual cash flow of $49,400, $27,200, and $24,500...

Project A has initial cost of $50,000, and annual cash flow of $49,400, $27,200, and $24,500 in years 1, 2, and 3, respectively. Project B has same initial cost of $50,000 but an annual cash inflow of $18,500 for 4 years. These are mutually exclusive projects. What is the crossover rate?

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Answer #1

Mutually exclusive are a set of projects out of which only one project can be accepted.
With the given values, we can determine the crossover rate using excel as:

Excel formulas used:

Answer: Hence, the crossover rate is -30.89%

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