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Johnsons Inc. is considering the following mutually exclusive projects: YEAR PROJECT A CASH FLOW PROJECT B CASH FLOW 0 -5000 -5000 1 800 3000 2
Johnsons Inc. is considering the following mutually exclusive projects:
YEAR PROJECT A CASH FLOW PROJECT B CASH FLOW
0 -5000 -5000
1 800 3000
2 900 3000
3 2000 800
4 5000 600
At what cost of capital will the net present value of the two projects be the same? (That is, what is the "crossover" rate?) Round it to one decimal place, e.g., 10.5.
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