Crossover rate Crossover rate is the discount rate that makes the NPVs of two

# Crossover rate crossover rate is the discount rate

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Crossover rate Crossover rate is the discount rate that makes the NPVs of two projects equal How to find the crossover rate? Compute the (B-A or A-B) cash flows and find IRR of (B-A or A-B) 50
Find IRR of (B-A) 51 Yea r Project A Project B B-A 0 -\$100 -\$100 \$0 1 50 20 -\$30 2 40 40 \$0 3 40 50 \$10 4 30 60 \$30 IRR 24% 21% 11.1% Crossover rate
Question - Crossover rate You are comparing two mutually exclusive projects. The crossover point is 12.3 percent. You have determined that you should accept project A if the required return is 13.1 percent. This implies you should: A. always accept project A. B. be indifferent to the projects at any discount rate above 13.1 percent. C. always accept project A if the required return exceeds the crossover rate. D. accept project B only when the required return is equal to the crossover rate. E. accept project B if the required return is less than 13.1 percent. 52