Question

Anderson Associates is considering two mutually exclusive projects that have the following cash flows: Project A...

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 answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Homework Answers

Answer #1

Answer: 17.93%

We need to compute the IRR of the difference of the cashflows of 2 projects.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Anderson Associates is considering two mutually exclusive projects that have the following cash flows:                         Project...
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...
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...
1. a) Anderson Associates is considering two mutually exclusive projects that have the following cash flows:...
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...
Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects...
Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and repeatable. The WACC is 11.50%. Year: 0 1 2 3 4 CF for S: $ (1,175.00) $ 795.00 $ 675.00 CF for L: $ (1,475.00) $ 400.00 $ 500.00 $ 795.00 $ 675.00 What is the crossover rate for Projects S and L? Note: Enter your answer rounded off to two decimal points. Do not enter % in...
1. Beta Enterprises, Inc. is considering a project that has the following cash flow and WACC...
1. Beta Enterprises, Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box. WACC: 14% Year: 0 1 2 3 Cash flows: -$950 $500 $300 $400 2. Delta Enterprises, Inc. has a WACC of 10% and is considering...
Consider the following two mutually exclusive projects:     Year Cash Flow (X) Cash Flow (Y) 0...
Consider the following two mutually exclusive projects:     Year Cash Flow (X) Cash Flow (Y) 0 –$ 20,900 –$ 20,900 1 9,075 10,550 2 9,550 8,025 3 9,025 8,925      Calculate the IRR for each project. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)     IRR   Project X %     Project Y %     What is the crossover rate for these two projects? (Do not round intermediate calculations. Enter your answer...
You are considering two mutually exclusive projects with the following cash flows. Which project would you...
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
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below....
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.   Time: 0 1 2 3   Project A Cash Flow -21,000 11,000 31,000 2,000   Project B Cash Flow -31,000 11,000 21,000 51,000 Use the NPV decision rule to evaluate these...
Projects A and B are mutually exclusive and have the following cash flows: Year Project A...
Projects A and B are mutually exclusive and have the following cash flows: Year Project A Project B 0 -$82,000 -$82,000 1 34,000 0 2 34,000 0 3 34,000 108,000 1. What is the crossover rate? 2. Do we have a conflict in ranking between the NPV and IRR methods if the required rate of return is 8%? 3. Which project should be accepted if the required rate of return is 5%? 4. Which project should be accepted if the...
Suppose a company has two mutually exclusive projects, both of which are three years in length....
Suppose a company has two mutually exclusive projects, both of which are three years in length. Project A has an initial outlay of $9,000 and has expected cash flows of $2,000 in year 1, $4,000 in year 2, and $5,000 in year 3. Project B has an initial outlay of $9,000 and has expected cash flows of $3,000 in year 1, $4,000 in year 2, and $4,000 in year 3. The required rate of return is 15% for projects at...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT