What is the crossover rate for these two


Consider the following two mutually exclusive projects X and Y:

X

Y

Year 0

-$5,500

-$4,500

Year 1

$3,000

$2,800

Year 2

$2,000

$2,000

Year 3

$2,000

$1,000

Year 4

$1,000

$1,000

a. What is the crossover rate for these two projects?

b. Sketch the NPV profiles for X and Y (point out the IRR of each project and the crossover rate in the NPV profiles).

c. The required return is 10%. Which project should be chosen?

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Financial Management: What is the crossover rate for these two
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