Question

Hanse, Inc., has the following two mutually exclusive projects available. Project S -$76,000 20,000 20,000 35,000 30,000 10,000 Project R $ 51,000 19,000 19,000 24,000 11,000 7,000 Year 0 1 2 4 5 a.What is the crossover rate for these two projects? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b.What is the NPV of each project at the crossover rate? (Do not round intermediate calculations and round yotr answers to 2 decimal places, e.g., 32.16.) Crossover rate % а. b. Project R Project S

Answer 1

Α Difference in cash flows year 0 3 B Project R Cash flows $51,000 $19,000 $19,000 $24,000 $11,000 $7,000 C Projects Cash flows $76,000 $20,000 $20,000 $35,000 $30,000 $10,000 $25,000 -$1,000 $1,000 -$11,000 -$19,000 -$3,000 9.80% IRR(D3:D8) Crossover Rate both projects NPV are equal at crossover rate | NPV of: Project R = Project S = $ 12,145.33 $ 12,145.33