Question

The two projects are as follows. Discount rate = 10%.                   Project X     Project...

The two projects are as follows. Discount rate = 10%.

                  Project X     Project Y

                  Year     Cash-Flow     Cash-Flow

                         0       -$100,000     -$100,000

                         1          50,000        10,000

                         2          40,000        30,000

3 30,000        40,000

                        4.         10,000        60,000

Calculate the payback period of project X

  1. 1.33 years
  2. 2.33 years
  3. 3.33 years
  4. 4.33 years

Calculate the crossover rate.

  1. 6.93%
  2. 6.58%
  3. 10.00%
  4. 7.17%

Imagine that discount is 5%, and the two projects are mutually exclusive, which project shall you choose?

  1. Project X
  2. Project Y
  3. Both
  4. None

Imagine that discount is 11%, and the two projects are mutually exclusive, which project shall you choose?

  1. Project X
  2. Project Y
  3. Both
  4. None
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Homework Answers

Answer #1

Payback period:

Crossover rate: Sorry about A and B, Its Project X and Project Y.

NPV at 5% - Project Y

NPV at 11% - Project X

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