Question
Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and repeatable. The WACC
Kosovski Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and repeatable. The WACC is 11.50%.
Year: | 0 | 1 | 2 | 3 | 4 |
CF for S: | $ (1,175.00) | $ 750.00 | $ 675.00 |
|
|
CF for L: | $ (1,575.00) | $ 400.00 | $ 500.00 | $ 795.00 | $ 675.00 |
What is the crossover rate for Projects S and L?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
The crossover rate for projects S and L is 1150 which is the companys WACC The crossover rate is the discount rate at which the net present values NPVs of two projects are equal Since the companys WAC...
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Step: 2
Step: 3
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
