Question

You are comparing two mutually exclusive projects. Both projects have an initial cost of $43,500 . Project A has cash inflows of $24,500 , $21,500 , and $18,500 over the next 3 years, respectively. Project B has cash inflows of $13,500 , $16,900 and $39,500 over the next 3 years. What is the crossover rate for Projects A and B?

19.54 percent

20.56 percent

20.30 percent

18.83 percent

Answer 1

D82 =IRR(D77:D80 Cash flows Project A Project B 75 Year Difference A-B 0 $ (43,500) $ (43,500) $ $13,500 $ 16,900$ 18,500$ 39,500$ 79 80 81 1 $ 24,500 2 $ 21,500 11,000 4,600 21,000 82 Crossover rate 18.83%