Project A and B are mutually exclusive. The cash flows of the two projects are:
Project A: This project has an initial cost of $ 78000 and has annual cash flows for three years of $ 35,300, $ 31,500, and $ 35,000, respectively.
Project B: This project has an initial cost of $ 78000 and has annual cash flows for three years of $ 26,900, $ 30,500, and $ 44,900, respectively.
What is the crossover rate?
At the required return of 5 percent, which project should you accept? Why?
Accept project A and reject project B.
Reject both projects.
Accept both projects.
Accept project B and reject project A.
Accept either one of the projects, but not both.
Show your calculation