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Consider the following two mutually exclusive projects: Year 0 1 2 3 Cash Flow (X) -$20,000 8,850 9,100 8,800 Cash Flow (Y) -$20,000 10,100 7,800

Consider the following two mutually exclusive projects:

Year

Cash Flow (X)

-$20,000

8,850

9,100

8,800

Cash Flow (Y)

-$20,000

10,100

7,800

8,700

Instruction:

Sketch the NPV profiles for X and Y over a range of discount rates from 0% to 25%. What is the crossover rate for these two projects (when both projects have the same NPV)? Show your steps.

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