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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.

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Answer #1

Answer: 17.93%

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

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