inc | a search Consider the following two mutually exclusive projects: -$15,400
ID: 2793988 • Letter: I
Question
inc | a search Consider the following two mutually exclusive projects: -$15,400 6,760 7,340 4,860 -$15,400 7,390 7,680 3,730 What is the IRR of Project X? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 e.g., 32.16.) IRR What is the IRR of Project Y? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 e.g., 32.16.) IRR What is the crossover rate for these two projects? (Do not round intermediate calculations and enter your answer as a p decimal places, e.g., 32.16.) Crossover rateExplanation / Answer
IRR is the rate at which Net Present Value is 0
Step 1
Copy Cash Flows of X and Y in Excel
Step 2
Press '=IRR' and select Cash Flows from Year 0 to 3 and press Enter
IRR of X = 11.79%
IRR of Y = 11.90%
Crossover rate is such at which Net Present Values of both projects are equal
For Cross over rate we need to take difference of Cash Flows of Both project and calculate IRR on the difference
9.63% is our crossover rate
Year X Y Difference 0 -15400 -15400 0 1 6760 7390 -630 2 7340 7680 -340 3 4860 3730 1130 IRR 11.79% 11.90% 9.63%Related Questions
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