1. You are a financial analyst for Lightening Electronics Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects X and Y. Each project has a cost of $8,000, and the required rate of return for each project is 14 percent. The projects expected net cash flows are as follows:

Expected Net Cash Flows

Year Project X Project Y

0 $(8,000) $(8,000)

1 5,500 3,200

2 3,500 3,200

3 2,500 3,200

4 1,100 3,200

1. Calculate each projects traditional payback period (PB), net present value (NPV) and internal rate of return (IRR).
2. Which project should be accepted if they are mutually exclusive?
3. Define the crossover rate and how we might use that rate to make decisions. Find the crossover rate for this problem.