NPV versus IRR, Crossover rate

Question 11. NPV versus IRR. Consider the following two mutually exclusive projects:
Year Cash Flow (A) Cash Flow (B)
0 -$20,000 -$20,000
1 10,000 4,000
2 7,000 4,500
3 5,000 9,000
4 3,000 9,500
Year Cash Flow (X) Cash Flow (Y)
0 -$5,000 -$5,000
1 2,700 1,700
2 1,700 2,100
3 1,800 2,600
Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent. What is the crossover rate for these two projects?

Solution Summary

Calculates the crossover rate for two projects.