Q8 - Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 –$ 19,900 –$ 19,900 1 8,825 10,050 2 9,050 7,775 3 8,775 8,675 a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%. b) Calculate the IRR for each project. c) Calculate the crossover rate for these two projects.
Q8 - Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 –$ 19,900 –$ 19,900 1 8,825 10,050 2 9,050 7,775 3 8,775 8,675 a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%. b) Calculate the IRR for each project. c) Calculate the crossover rate for these two projects.
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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Question
Q8 -
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Consider the following two mutually exclusive projects: |
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Year |
Cash Flow |
|
Cash Flow |
||||
|
0 |
–$ |
19,900 |
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|
–$ |
19,900 |
|
|
1 |
|
8,825 |
|
|
|
10,050 |
|
|
2 |
|
9,050 |
|
|
|
7,775 |
|
|
3 |
|
8,775 |
|
|
|
8,675 |
|
- a) Calculate the
NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%. - b) Calculate the
IRR for each project. - c) Calculate the crossover rate for these two projects.
Transcribed Image Text:8)
Consider the following two mutually exclusive projects:
Cash Flow
Cash Flow
Year
(X)
(Y)
-$19,900
-$ 19,900
1
8,825
10,050
2
9,050
7,775
3
8,775
8,675
a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%.
b) Calculate the IRR for each project.
c) Calculate the crossover rate for these two projects.
d) At which range of discount rates would you choose Project X over Project Y?
e) At which range of discount rates would you choose Project Y over Project X?
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