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Jackson Jets

This is a multiple choice question.

Jackson Jets is considering two mutually exclusive projects. The projects have the following cash flows:

Project A Project B
Year Cash Flow Cash Flow
0 -$10,000 -$8,000
1 1,000 7,000
2 2,000 1,000
3 6,000 1,000
4 6,000 1,000

At what cost of capital do the two projects have the same net present value? (That is, what is the crossover rate?)

a) 11.20%
b) 12.26%
c) 12.84%
d) 13.03%
e) 14.15%

Solution Preview

Jackson Jets is considering two mutually exclusive projects. The projects have the following cash flows:

Project A Project ...

Solution Summary

This solution is comprised of a detailed explanation to calculate the crossover rate for two projects.

$2.19