Question
A company is considering the following two mutually exclusive projects. What is the cost of capital that makes the two projects' NPVs to be the
A company is considering the following two mutually exclusive projects. What is the cost of capital that makes the two projects' NPVs to be the same? (Hint: consider the incremental project's IRR)
| Year | Project A cash flows | Project B cash flows |
| 0 | -$500,000 | -$300,000 |
| 1 | $120,000 | $50,000 |
| 2 | $150,000 | $110,000 |
| 3 | $165,000 | $130,000 |
| 4 | $200,000 | $125,000 |
| 5 | $235,000 | $150,000 |
a. 14.10%
b. 14.35%
c. 14.60%
d. 14.85%
e. 15.10%
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The Mining Valuation Handbook Mining And Energy Valuation For Investors And Management
Authors: Victor Rudenno
4th Edition
0730377075, 978-0730377078
