Share
Explore BrainMass

interest rate

Paradise Enterprises has gathered projected cash flows for two projects. At what interest rate would the company be indifferent between the two projects? Which project is better if the required return is above this interest rate? Why?

Year Project(I) Project(J) Difference
----------------------------------------------------
0 -$150,000 -$150,000 $0
1 $ 65,000 $ 41,000 $ 24,000
2 $ 52,000 $ 48,000 $ 4,000
3 $ 49,000 $ 64,000 -$15,000
4 $43,000 $ 63,000 -$20,000

Solution Summary

The interest rate in this case is emphasized.

$2.19