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Consider the following cash flows for two mutually exclusive investments Year 0 Year Year 2 Year 3 770 562 342 138 860 -870 100 288
Consider the following cash flows for two mutually exclusive investments Year 0 Year Year 2 Year 3 770 562 342 138 860 -870 100 288 (1) Draw the NPV profiles for project A and project B. Label the crossover point (2) Which statement is true? a. if the required rate of return is 15% then project B is the better of the two b. if the required rate of return is 21.6% then project B is the better of the two c. if the required rate of return is 18.3% then project B is the better of the two d. if the required rate of return is 7.7% then projects A and B create the same amount of wealth e. if the required rate of return is 7.5% then project B is the better of the two Consider the following cash flows for two mutually exclusive investments Year 0 Year Year 2 Year 3 770 562 342 138 860 -870 100 288 (1) Draw the NPV profiles for project A and project B. Label the crossover point (2) Which statement is true? a. if the required rate of return is 15% then project B is the better of the two b. if the required rate of return is 21.6% then project B is the better of the two c. if the required rate of return is 18.3% then project B is the better of the two d. if the required rate of return is 7.7% then projects A and B create the same amount of wealth e. if the required rate of return is 7.5% then project B is the better of the two
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