15. For the two mutually exclusive projects whose cashflows are listed below, ca

Question

15. For the two mutually exclusive projects whose cashflows are listed below, calculate the Crossover Rate and circle the correct answer below.

Year                                                    Project L                                             Project M

0                                                          $(125,000)                                           $(125,000)

1                                                          $100,000 $15,000

2                                                          $60,000                                               $40,000

3                                                          $40,000                                               $80,000

4                                                          $15,000                                               $120,000

A. 10.57%

B. 11.61%

C. 12.08%

D. 13.61%

E. 14.89%

Explanation / Answer

year L M difference 0 -125000 -125000 0 1 100000 15000 85000 2 60000 40000 20000 3 40000 80000 -40000 4 15000 120000 -105000 IRR 13.61% so cross over rate is 13.69% so option d

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