Question
Canfly Airlines is considering two mutually exclusive projects, Project A and Project B. The projects have the following cash flows (in millions of dollars): Year
Canfly Airlines is considering two mutually exclusive projects, Project A and Project B. The projects have the following cash flows (in millions of dollars):
| Year | Project A Cash Flow | Project B Cash Flow |
| 0 | -$4.0 | -$4.5 |
| 1 | 2.0 | 1.7 |
| 2 | 3.0 | 3.2 |
| 3 | 5.0 | ? |
The crossover rate of the two projects NPV profiles is 9 percent. What is the cash flow for Project B at t = 3?
(Ans: 5.79 million)
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Continuous Time Finance
Authors: Robert C. Merton
1st Edition
0631185089, 978-0631185086
