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Crossover Rate of Two Projects

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Packard Electronics Corp. is evaluating the two mutually exclusive projects shown below.

Boundless Corp.
Period, Project A Cash Flows, Project B Cash Flows
0 $(100,000) $(150,000)
1 50,000 15,000
2 40,000 30,000
3 30,000 50,000
4 20,000 70,000
5 10,000 80,000

What is the "crossover rate" of the two projects? (Round off to the nearest (0.01%)

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Solution Summary

The solution gives detailed steps on calculating the crossover rate if the cash flows for both project A and B are given. All the formula and calcuations are shown and explained.

Solution Preview

Let r be the crossover rate,

so we need to calculate the difference between colume 1 ...

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