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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)

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
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
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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 initial cost 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: -50,000 Yr 1: 49,400 Yr 2: 27,200 Yr 3: 24,500 Project B: -50,000 Yr 1: 18,500 Yr 2: 18,500 Yr 3: 18,500 Yr 4: 18,500 Crossover rate=The weighted average cost of capital, also known as the crossover rate, is the rate of returns that occurs when the net present values (NPV) of projects are equivalent. Theref you find difference between cash flows find the IRR: -50,000 Yr 1: 49,400-18,500=30,900 Yr 2: 27,200-18,500=8,700 Yr 3: 24,500-18,500=6,000 Yr 4: 0-18,500=-18500
Transcribed Image Text: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 initial cost 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: -50,000 Yr 1: 49,400 Yr 2: 27,200 Yr 3: 24,500 Project B: -50,000 Yr 1: 18,500 Yr 2: 18,500 Yr 3: 18,500 Yr 4: 18,500 Crossover rate=The weighted average cost of capital, also known as the crossover rate, is the rate of returns that occurs when the net present values (NPV) of projects are equivalent. Theref you find difference between cash flows find the IRR: -50,000 Yr 1: 49,400-18,500=30,900 Yr 2: 27,200-18,500=8,700 Yr 3: 24,500-18,500=6,000 Yr 4: 0-18,500=-18500
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