You are using a net present value profile to compare investments A and B, which are mutually exclusive. Which one of the following statements correctly applies to the crossover point between these two?
A) The internal rate of return for project A equals that of project B, but generally does not equal zero.
B) The internal rate of return of each project is equal to zero.
C) The net present value of each project is equal to zero.
D) The net present value of project A equals that of project B, but generally does not equal zero.
E) The net present value of each project is equal to the respective project's initial cost.

Question

Quizplus · Accepted Answer

The crossover point is where the net present values of both projects are equal, indicating the discount rate at which both projects are equally preferable.

You Are Using a Net Present Value Profile to Compare