Project A and B are mutually exclusive. The cash flows of the two projects are:

Project A: This project has an initial cost of $ 78000 and has annual cash flows for three years of $ 35,300, $ 31,500, and $ 35,000, respectively.

Project B: This project has an initial cost of $ 78000 and has annual cash flows for three years of $ 26,900, $ 30,500, and $ 44,900, respectively.

What is the crossover rate?

At the required return of 5 percent, which project should you accept? Why?

Accept project A and reject project B.

Reject both projects.

Accept both projects.

Accept project B and reject project A.

Accept either one of the projects, but not both.

Show your calculation