Aa 27. Question: Project A has cash flows of -$50,000, $49,400, $27,200, and $24,500 for Years 0 to 3, respectively. Project B has an initialcost of $50,000 and an annual cash inflow of $18,500 for four years. These are mutually exclusive projects. What is the crossover rate?How do I solve this step by step on the BAII plus (Business Analyst)(Mutually exclusive means you can only choose 1)Project A:-50,000Yr 1: 49,400Yr 2: 27,200Yr 3: 24,500Project B:-50,000Yr 1: 18,500Yr 2: 18,500Yr 3: 18,500Yr 4: 18,500Crossover rate=The weighted average cost of capital, also known as the crossover rate, is the rate of returns that occurs when the netpresent values (NPV) of projects are equivalent.Theref you finddifference between cash flows find the IRR:-50,000Yr 1: 49,400-18,500=30,900Yr 2: 27,200-18,500=8,700Yr 3: 24,500-18,500=6,000Yr 4: 0-18,500=-18500

IRR is the rate of return at which NPV =0 Depending upon on the cashflows , we will feed the…

Answered: d an annual cash inflow of $18,500 for…

d an annual cash inflow of $18,500 for four years. These ar step by step on the BAll plus (Business Analyst) means you can only choose 1)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 −$ 20,200 −$ 20,200 1 8,900 10,200 2 9,200 7,850 3 8,850 8,750 Calculate the IRR for each project. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) What is the crossover rate for these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (X) () 0. -$19,600 19,600 8,750 8,900 8,700 9,900 7,700 8,600 Calculate the IRR for each project. (Do not round intermedlate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) 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 What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 23
Consider two mutually exclusive projects, A and B, whose costs and cash flows are shown in the following table: Year Project A Project B 1 $(15,000) $(22,840) 2 9,000 8,000 3 8,000 8,000 4 2,500 8,000 5 3,000 8,000 Calculate the cross over rate. Please use equations not just excel
Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 28,500 −$ 28,500 1 13,900 4,050 2 11,800 9,550 3 8,950 14,700 4 4,850 16,300 a-1. What is the IRR for each of these projects? a-2. Using the IRR decision rule, which project should the company accept? multiple choice 1 Project A Project B a-3. Is this decision necessarily correct? multiple choice 2 Yes No b-1. If the required return is 11 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b-2. Which project will the company choose if it applies the NPV decision rule? multiple choice 3 Project A Project B c. At what discount rate would the company be indifferent between these two projects? (Do not round intermediate…
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y)0-$19.100-$ 19,100 18,625 9,650 2 8,650 7,575 3 8,575 8,475 Calculate the IRR for each project. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) What is the crossover rate for these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.. 32.16.) What is the NPV of Projects X and Y at discount rates of 0 percent, 15 percent, and 25 percent?
Bruin, Incorporated, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 66,000 −$ 66,000 1 42,000 28,400 2 36,000 32,400 3 24,000 38,000 4 15,200 24,400 a-1. What is the IRR for each of these projects? a-2. If you apply the IRR decision rule, which project should the company accept? b-1. Assume the required return is 12 percent. What is the NPV for each of these projects? b-2. Which project will you choose of you apply the NPV decision rule? c-1. Over what range of discount rates would you choose Project A? c-2. Over what range of discount rates would you choose Project B? d. At what discount rate would you be indifferent between these two projects?
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 1 2 3 -$20,000 8,850 9,100 8,800 2 Instruction: Sketch the NPV profiles for X and Y over a range of discount rates from 0% to 25%. What is the crossover rate for these two projects (when both projects have the same NPV)? Show your steps. -$20,000 10,100 7,800 8,700 A▾ B I = 18 1
The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (1) Cash Flow (II) 0 123 -$ 73,000 33,000 33,000 3 33,000 -$ 17,100 9,250 9,250 9,250 a-1.If the required return is 11 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project I Project II - If the company applies the profitability index decision rule, which project should the 2. firm accept? O Project I O Project II b- What is the NPV for both projects? (A negative answer should be indicated by a 1. minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project I Project II
3. You are analyzing the following two mutually exclusive projects and have developed the following Which information. Please calculate the IRRS for the two projects and the crossover rate. project should you accept if the cost of capital is 5%, and which project should you accept if the cost of capital is 10%? Year 0 1 3 Project A Cash Flow -$84,500 $29,000 $40,000 $27,000 IRR A: IRR B: Crossover Rate: If WACC-5%, accept If WACC=10%, accept Project B Cash Flow -$76,900 $25,000 $35,000 $26,000 J
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 $20,000 $20,000 1 8,850 10,100 23 9,100 7,800 8,800 8,700 Calculate the IRR for each project. (Round your answers to 2 decimal places. (e.g., 32.16)). IRR Project X Project Y % % What is the crossover rate for these two projects? (Round your answer to 2 decimal places. (e.g., 32.16)). Crossover rate %
The financial manager of "XY" company, is considering three projects A, B and C with the initial cost and the expected cash flows are as follows: Project C €2,200 Project A Project B €7,200 Years 1 €2,200 €2,200 3 €9,124 Initial cost €6,000 €6,000 €6,000 Investments A and B are mutually exclusive. a) Which project will the financial manager choose, based on the payback period method? b) Calculate the NPV for each project, if the cost of capital (required rate of return) is 10%. Which project will the manager choose based to this method?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$29,000 −$29000 1 14,400 4,300 2 12,300 9,800 3 9,200 15,200 4 5,100 16,800 a) What is the Internal Rate of Return (IRR) for each of these projects? b) Using the IRR decision rule, which project should the company accept? c) If the required return is 11 percent, what is the Net Present Value (NV) for each of these projects? d) Using the NPV decision rule, which project should the company accept? e) Why do you think the NPV and IRR rules do not agree on same project approval/rejection direction?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS