Question
2. Heller Airlines is considering two mutually exclusive projects, A and B. The projects have the same risk. Below are the cash flows from
2. Heller Airlines is considering two mutually exclusive projects, A and B. The projects have the same risk. Below are the cash flows from each project: Year 0 1 Project A Cash Flow Project B Cash Flow -$2,000 6,000 a. Graph the NPV profile of each investment. -$10,000 15,000 b. Indicate the crossover point and calculate the crossover rate. CR=12.5% c. If the cost of capital is 8%, which project should be chosen and why? NP (A)=$3555.56, NPV(B)=$3888.89 Choose B since NPV(B) >NPV(A)>0
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Financial Management Core Concepts
Authors: Raymond M Brooks
2nd edition
132671034, 978-0132671033
