You are considering the following two mutually exclusive projects. The crossover point is _____ and Project _____ should be accepted if the discount rate is 14 percent.
A) 12.79 percent; B
B) 13.28 percent; A
C) 13.28 percent; B
D) 15.96 percent; A
E) 15.96 percent; B

Question

You are considering the following two mutually exclusive projects. The crossover point is _____ and Project _____ should be accepted if the discount rate is 14 percent. 
A) 12.79 percent; B 
B) 13.28 percent; A 
C) 13.28 percent; B 
D) 15.96 percent; A 
E) 15.96 percent; B

Quizplus · Accepted Answer

The crossover point is where the NPV of both projects is equal. Using a financial calculator or spreadsheet, we find the crossover point is 13.28%. If the discount rate is 14%, then Project B has a higher NPV than Project A. Therefore, we should choose Project B.

You Are Considering the Following Two Mutually Exclusive Projects