Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Determine the crossover point for these projects’ NPV profiles.
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these. Time Project A Cash Flows Project B Cash Flows 0 -$46,800 -$63,600 1 -21,600 20,400 2 43,200 20,400 3 43,200 20,400 4 43,200 20,400 5 -28,800 20,400 Determine the crossover point for these projects’ NPV profiles.
Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows
Section: Chapter Questions
Problem 1Q
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Capital Budgeting
Assume you are evaluating two mutually exclusive projects, the cash flows of which appear below and that your company uses a cost of capital of 13% to evaluate projects such as these.
Time |
Project A Cash Flows |
Project B Cash Flows |
0 |
-$46,800 |
-$63,600 |
1 |
-21,600 |
20,400 |
2 |
43,200 |
20,400 |
3 |
43,200 |
20,400 |
4 |
43,200 |
20,400 |
5 |
-28,800 |
20,400 |
- Determine the crossover point for these projects’ NPV profiles.
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