Mooradian Corporation estimates that its discount rate is 11%. The company is considering two mutually exclusive projects whose after-tax cash flows are as follows: (amounts in brackets represent negative cash flows)

Year Project S Project L

0 ($20,000) ($20,000)

1 10,000 4,000

2 7,000 4,500

3 5,000 9,000

4 5,000 10,500

Questions to be answered:

1. Calculate the IRR of each project. Which project do you choose?
2. calculate the Crossover Rate.

(c) Label the x and y intercepts and the crossover rate of the NPV profile below in the spaces provided with numbers. NPV 1. 2. 3. % 4. 5