Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text: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
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