Consider the following two mutually exclusive projects:    Second part of the Question  Year Cash Flow (X)   Cash Flow (Y) 0 –$ 19,900     –$ 19,900   1   8,825       10,050   2   9,050       7,775   3   8,775       8,675       d) At which range of discount rates would you choose Project X over Project Y? e) At which range of discount rates would you choose Project Y over Project X?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Consider the following two mutually exclusive projects:

   Second part of the Question 

Year

Cash Flow
(X)

 

Cash Flow
(Y)

0

–$

19,900

 

 

–$

19,900

 

1

 

8,825

 

 

 

10,050

 

2

 

9,050

 

 

 

7,775

 

3

 

8,775

 

 

 

8,675

 

 

 

d) At which range of discount rates would you choose Project X over Project Y?

e) At which range of discount rates would you choose Project Y over Project X?

8)
Consider the following two mutually exclusive projects:
Cash Flow
Cash Flow
Year
(X)
(Y)
-$19,900
-$ 19,900
1
8,825
10,050
2
9,050
7,775
3
8,775
8,675
a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%.
b) Calculate the IRR for each project.
c) Calculate the crossover rate for these two projects.
d) At which range of discount rates would you choose Project X over Project Y?
e) At which range of discount rates would you choose Project Y over Project X?
Transcribed Image Text:8) Consider the following two mutually exclusive projects: Cash Flow Cash Flow Year (X) (Y) -$19,900 -$ 19,900 1 8,825 10,050 2 9,050 7,775 3 8,775 8,675 a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%. b) Calculate the IRR for each project. c) Calculate the crossover rate for these two projects. d) At which range of discount rates would you choose Project X over Project Y? e) At which range of discount rates would you choose Project Y over Project X?
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