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how do you solve for the crossover rate using this formula method? 6. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash
how do you solve for the crossover rate using this formula method?
6. Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 -$10,110 -$10,110 1 5,373 4,443 2 3,373 3,543 3 4,473 5,343 What is the crossover rate for these two projects? Net Present Value (NPV) NPV = PV(CF Inflow) - PV(CF Outflow) Internal Rate of Return (IRR) (1 + IRR)" (1 + IRR)" n n CF CF, Ondows CF Infows h = N h h=0 h=0 = CE Inflows I= (1 + i)" CF, Outflows 1rzo (1+i)" When you have a single cash outflow at tro: CF, Inflows At IRR, PV(CFinflow)=PV(CFoutflow) When you have a single cash outflow at t=0: o Initial Investment (or Cost) = * = (1 + IRR)" NPV | = Cost CF Inflows = (1 + i)" h=0 h=0 Profitability Index = PV(CFIN) PV(CFOUT)Step by Step Solution
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