Crenshaw Enterprises has gathered projected cash flows for two projects. Year Project I Project J -$265,000-$265,000 0 1 113,500 94,000 234 2 106,000 100,500 90,000 102,500 79,000 109,500 a. At what interest rate would the company be indifferent between the two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Which project is better if the required return is above this interest rate? a. Interest rate b. %

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
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Crenshaw Enterprises has gathered projected cash flows for two projects.
Year
Project I
Project J
-$265,000-$265,000
0
1
113,500
94,000
234
106,000
100,500
90,000
102,500
79,000
109,500
a. At what interest rate would the company be indifferent between the two projects? (Do
not round intermediate calculations and enter your answer as a percent rounded to
2 decimal places, e.g., 32.16.)
b. Which project is better if the required return is above this interest rate?
a. Interest rate
b.
%
Transcribed Image Text:Crenshaw Enterprises has gathered projected cash flows for two projects. Year Project I Project J -$265,000-$265,000 0 1 113,500 94,000 234 106,000 100,500 90,000 102,500 79,000 109,500 a. At what interest rate would the company be indifferent between the two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Which project is better if the required return is above this interest rate? a. Interest rate b. %
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