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The following cash flows are estimated for two mutually exclusive projects: Year Project A CF Project B CF 0-$100,000-$100,000 1 $60,000 $30,000 2 $40,000 $40,000 3 $20,000 $20,000 4 $10,000 $50,000 a. Calculate the internal rate of return for each project. b. Calculate the cross-over rate of projects A and B. c. When is the project B more lucrative than the project A? When is the project A is more lucrative than the project B7 d. When the discount rate (r) is 12%, which project should the investor choose?

The following cash flows are estimated for two mutually exclusive projects: Year Project A CF Project B CF 0-$100,000-$100,000 1 $60,000 $30,000 2 $40,000 $40,000 3 $20,000 $20,000 4 $10,000 $50,000 a. Calculate the internal rate of return for each project. b. Calculate the cross-over rate of projects A and B. c. When is the project B more lucrative than the project A? When is the project A is more lucrative than the project B7 d. When the discount rate (r) is 12%, which project should the investor choose?

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
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The following cash flows are estimated for two mutually exclusive projects: Year Project A CF Project B CF 0-$100,000-$100,000 1 $60,000 $30,000 2 $40,000 $40,000 3 $20,000 $20,000 4 $10,000 $50,000 a. Calculate the internal rate of return for each project. b. Calculate the cross-over rate of projects A and B. c. When is the project B more lucrative than the project A? When is the project A is more lucrative than the project B7 d. When the discount rate (r) is 12%, which project should the investor choose?
Transcribed Image Text:The following cash flows are estimated for two mutually exclusive projects: Year Project A CF Project B CF 0-$100,000-$100,000 1 $60,000 $30,000 2 $40,000 $40,000 3 $20,000 $20,000 4 $10,000 $50,000 a. Calculate the internal rate of return for each project. b. Calculate the cross-over rate of projects A and B. c. When is the project B more lucrative than the project A? When is the project A is more lucrative than the project B7 d. When the discount rate (r) is 12%, which project should the investor choose?
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