Question
Question 1A (1+1+1=3 marks) Sunrise Ltd. is a popular caf chain in Singapore. The management is considering the following two mutually exclusive projects available: Year
Question 1A (1+1+1=3 marks)
Sunrise Ltd. is a popular caf chain in Singapore. The management is considering the following two mutually exclusive projects available:
| Year | Project Mocha ($) | Project Cappuccino ($) |
| 0 | -40,000 | -55,000 |
| 1 | 26,000 | 24,000 |
| 2 | 24,000 | 21,000 |
| 3 | 15,000 | 28,000 |
| 4 | 11,000 | 37,000 |
| 5 | 22,000 | 26,000 |
(i) What is the crossover rate.? Round your answer to two decimal points.
(ii) What is the NPV for these two projects at crossover rate?
(iii)Which project is better if the required return is above crossover rate? Why?
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Financial Markets and Institutions
Authors: Anthony Saunders, Marcia Cornett
6th edition
