Woodson Inc.has two possible projects,Project A and Project B with the following cash flows: Year
Project A
Project B
0
−150,000
−100,000
1
100,000
45,000
2
105,000
65,000
3
40,000
80,000
At what required rate of return do the two projects have the same net present value (NPV)?
(In other words,what is the "crossover rate" of the projects' NPV profiles?
)
A) 10.3%
B) 13.5%
C) 15.8%
D) 21.7%
E) 34.8%

Question

Quizplus · Accepted Answer

The Answer of Woodson Inc.has two possible projects,Project A and Project B with the following cash flows: Year
Project A
Project B
0
−150,000
−100,000
1
100,000
45,000
2
105,000
65,000
3
40,000
80,000
At what required rate of return do the two projects have the same net present value (NPV)?
(In other words,what is the "crossover rate" of the projects' NPV profiles?
)
A) 10.3%
B) 13.5%
C) 15.8%
D) 21.7%
E) 34.8%