The crossover rate is the discount rate where both projects have the same ________.
A)IRR
B)PI
C)NPV
D)length to completion

Question

Quizplus · Accepted Answer

The crossover rate is the point at which the NPV of one project is equal to the NPV of the other project, therefore the correct choice is C, NPV. Option A, IRR, refers to the rate at which the NPV of an investment is zero, which is not necessarily the same as the crossover rate. Option B, PI, is based on the ratio of the present value of cash inflows to the initial investment, but does not provide information on the point at which two projects have the same value. Option D, length to completion, is irrelevant to determining the crossover rate.

The Crossover Rate Is the Discount Rate Where Both Projects