Question
Asked Nov 30, 2019
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6) Year Project A Project B Difference  
  0 -75000 -75000 0  
  1 26300 24000 2300  
  2 29500 26900 2600  
  3 45300 51300 -6000  
  Crossover rate 14.60%  

Hi I need help with the following question! Thank you!

Are you going to accept project A or project B? Why?

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Expert Answer

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Step 1

Calculate the NPV of both the projects at different rates.

A
C
D
Project A
8% S
10% S
14.6% S
15.00% S
NPV for Project A
NPV for Project B
Project B
-75,000.00 S
26,300.00 S
29,500.00 S
45,300.00 S
142 Rate
-75,000.00 S 10,603.947568968100 S 11,008.230452674900
24,000.00 7,323.816679188560 S 7,592.036063110430
26,900.00 S
51,300.00 S
143
144
510.079684948883 S
509.928993295733
145
146
-38.711268184416
-59.587408564141
S -2,687.231559683890 -2,806.155419567640
147
17%
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A C D Project A 8% S 10% S 14.6% S 15.00% S NPV for Project A NPV for Project B Project B -75,000.00 S 26,300.00 S 29,500.00 S 45,300.00 S 142 Rate -75,000.00 S 10,603.947568968100 S 11,008.230452674900 24,000.00 7,323.816679188560 S 7,592.036063110430 26,900.00 S 51,300.00 S 143 144 510.079684948883 S 509.928993295733 145 146 -38.711268184416 -59.587408564141 S -2,687.231559683890 -2,806.155419567640 147 17%

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Step 2

Excel Worki...

A
C
D
Project A
--75000
26300
NPV for Project A
-NPV ( A1 43 ,SBS144SBS146 )+SBS143
-NPV(A144, SBS144SBS146 )+SBS143
=NPV (A145,SB$144:SBS146 )+SBS143
-NPV ( A1 46 ,SB$144 SBS146 )+SBS143
-NPV( A1 47 , SBS144:SBS146 )+SBS143
NPV for Project B
NPV(A143,SCS144SCS146+SCS143
NPV(A144 SCS144SCS146+SC$143
NPV(A145,SCS144SCS146)+SCS143
NPV(A146,SCS144SCS146)+SCS143
NPV(A147,SCS144SCS146))+SCS143
Project B
142 Rate
143 0.08
-75000
24000
26900
51300
144 0.1
145 0.146
146 0.15
147 0.17
29500
45300
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A C D Project A --75000 26300 NPV for Project A -NPV ( A1 43 ,SBS144SBS146 )+SBS143 -NPV(A144, SBS144SBS146 )+SBS143 =NPV (A145,SB$144:SBS146 )+SBS143 -NPV ( A1 46 ,SB$144 SBS146 )+SBS143 -NPV( A1 47 , SBS144:SBS146 )+SBS143 NPV for Project B NPV(A143,SCS144SCS146+SCS143 NPV(A144 SCS144SCS146+SC$143 NPV(A145,SCS144SCS146)+SCS143 NPV(A146,SCS144SCS146)+SCS143 NPV(A147,SCS144SCS146))+SCS143 Project B 142 Rate 143 0.08 -75000 24000 26900 51300 144 0.1 145 0.146 146 0.15 147 0.17 29500 45300

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