Q8 -Consider the following two mutually exclusive projects: YearCash Flow(X) Cash Flow(Y)0–$19,900 –$19,900 1 8,825 10,050 2 9,050 7,775 3 8,775 8,675 a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%.b) Calculate the IRR for each project.c) Calculate the crossover rate for these two projects. 8)Consider the following two mutually exclusive projects:Cash FlowCash FlowYear(X)(Y)-$19,900-$ 19,90018,82510,05029,0507,77538,7758,675a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%.b) Calculate the IRR for each project.c) Calculate the crossover rate for these two projects.d) At which range of discount rates would you choose Project X over Project Y?e) At which range of discount rates would you choose Project Y over Project X?

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Answered: Q8 - Consider the following two…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 7P

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Q8 -

Consider the following two mutually exclusive projects:

Year	Cash Flow (X)		Cash Flow (Y)
0	–$	19,900		–$	19,900
1		8,825			10,050
2		9,050			7,775
3		8,775			8,675

a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%.
b) Calculate the IRR for each project.
c) Calculate the crossover rate for these two projects.

8)
Consider the following two mutually exclusive projects:
Cash Flow
Cash Flow
Year
(X)
(Y)
-$19,900
-$ 19,900
1
8,825
10,050
2
9,050
7,775
3
8,775
8,675
a) Calculate the NPV of Projects X and Y at discount rates of 0 %, 5 % ,10 %, 15 %, and 20%.
b) Calculate the IRR for each project.
c) Calculate the crossover rate for these two projects.
d) At which range of discount rates would you choose Project X over Project Y?
e) At which range of discount rates would you choose Project Y over Project X?

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