1. What is the crossover rate for these two projects?

Year Project A Project B

0 ($25) ($25)

1 20 20

2 10 10

3 15 8

4 20 6

2. RadioheadIncpurchased a new plastic tree making plant. The new truck cost $30,000, and it is expected to generate net after-tax operating cash flows, including depreciation, of $8,500 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The companys cost of capital is 12%.What istheproject's optimal economic life?

Year Annual Operating Cash Flow Salvage Value

0 ($30,000) $30,000

1 8,500 20,000

2 8,500 19,000

3 8,500 15,000

4 8,500 7,000

5 8,500 0