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29 Sep 2019
Consider two mutually exclusive projects. The crossover rate for the two projects is 12%, at which point both have an NPV of 5,000. At a discount rate of 10%, project 1 has a higher NPV than Project 2. A) If the appropriate discount rate is actually 15% (not 10%) which project is better? explain your answer B)Draw a rough sketch of NPVs and the crossover point to illustrate your answer. Use the following additional information as needed: Project 1's IRR is 15%. Project 2's IRR is 22% Label the information provided on your graph.
Consider two mutually exclusive projects. The crossover rate for the two projects is 12%, at which point both have an NPV of 5,000. At a discount rate of 10%, project 1 has a higher NPV than Project 2. A) If the appropriate discount rate is actually 15% (not 10%) which project is better? explain your answer B)Draw a rough sketch of NPVs and the crossover point to illustrate your answer. Use the following additional information as needed: Project 1's IRR is 15%. Project 2's IRR is 22% Label the information provided on your graph.
Elin HesselLv2
29 Sep 2019