Question
Werqo Corp is considering two mutually exclusive projects, Projects A and B, and has determined that the crossover rate for these projects is 12.8 percent
Werqo Corp is considering two mutually exclusive projects, Projects A and B, and has determined that the crossover rate for these projects is 12.8 percent and the required return for both projects is 6.7 percent. You have determined that you should accept project A if the required return is 14.8 percent. Given this you know that:
Project A has a zero NPV at a discount rate of 12.8 percent.
you are indifferent to the projects at any discount rate below 14.8 percent.
both projects have a zero NPV at a discount rate of 12.8 percent.
Project B provides an internal rate of return of 12.8 percent.
Project A will have a higher NPV than Project B if the discount rate exceeds the crossover rate.
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