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Consider the following two mutually exclusive investments. Year Investment A Investment B 0 -125 -55 1 50 40 2 100 50 3 70 15 Calculate
Consider the following two mutually exclusive investments.
| Year | Investment A | Investment B |
| 0 | -125 | -55 |
| 1 | 50 | 40 |
| 2 | 100 | 50 |
| 3 | 70 | 15 |
- Calculate the IRR for each investment
- What is the crossover rate?
- Sketch the NPV profiles for Investment A and B in one graph along with the crossover rate. Then write down which investment will be accepted - under what circumstances? That is, under which rates will the IRR and NPV criteria rank the two project differently?
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