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Net Present Value versus IRR Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -20,000 -20,000 1 8,850 10,100

Net Present Value versus IRR

Consider the following two mutually exclusive projects:

Year Cash Flow (X) Cash Flow (Y)

0 -20,000 -20,000

1 8,850 10,100

2 9,100 7,800

3 8,800 8,700

Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover rate for these two projects.

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