Considering two mutually exclusive projects. The crossover rate between these two projects is ___ percent and...

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Finance

Considering two mutually exclusive projects. The crossover ratebetween these two projects is _ percent and Project _ should beaccepted if the required return is less than the crossoverrate.
Year Project A Project B
0 ?$27,000 ?$27,000
1 10,000 18,100
2 10,000 8,000
3 18,000 10,120
11.75%; A
11.75%; B
17.19%; B
18.64%; A
17.19%; A

Answer & Explanation Solved by verified expert

3.6 Ratings (342 Votes)

Answer Cross over rate is also known as weighted average cost of capital In order to calculate the cross over rate we will subtract the cash flows of project A and B for each year and solve it for NPV 0 Let the crossover rate See Answer

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Transcribed Image Text

Considering two mutually exclusive projects. The crossover ratebetween these two projects is ___ percent and Project ___ should beaccepted if the required return is less than the crossoverrate.YearProject AProject B0?$27,000?$27,000110,00018,100210,0008,000318,00010,12011.75%; A11.75%; B17.19%; B18.64%; A17.19%; A

Year	Project A		Project B
0		?$27,000		?$27,000
1		10,000		18,100
2		10,000		8,000
3		18,000		10,120