Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
You've estimated the following cash flows (in $ million) for two mutually exclusive projects:
Year | Project A | Project B |
0 | -27 | -43 |
1 | 30 | 45 |
2 | 40 | 50 |
What is the crossover rate, i.e., the discount rate at which both projects have the same NPV?
What is project A's NPV at the crossover rate?
What is project B's NPV at the crossover rate?
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