Question

# 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 as a percent rounded to 2 decimal places, e.g., 32.16.)

 Crossover rate %

 Year Project X cash flow 0 -20900 1 9075 2 9550 3 9025 IRR =Using IRR function in MS excel =irr(-20900,9075,9550,9025) 15.42% Year Project Y cash flow 0 -20900 1 10550 2 8025 3 8925 IRR =Using IRR function in MS excel =irr(-20900,10550,8025,8925) 15.63% Year Project X cash flow Project Y cash flow Differential cash flow 0 -20900 -20900 0 1 9075 10550 1475 2 9550 8025 -1525 3 9025 8925 -100 Cross over rate =Using IRR function in MS excel =irr(0,1475,-1525,-100) 9.58%

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