In general, we say that two projects with cash flows (x_{i}) and (y_{i}, i=0,1,2, ldots), (n), cross
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In general, we say that two projects with cash flows \(x_{i}\) and \(y_{i}, i=0,1,2, \ldots\), \(n\), cross if \(x_{0}
(a) Show that there is a crossover value \(c>0\) such that \(P_{x}(c)=P_{y}(c)\).
(b) For Exercise 13, calculate the crossover value \(c\).
Data from Exercises 13
Consider the two projects whose cash flows are shown in Table 2.7. Find the IRRs of the two projects and the NPVs at 5\%. Show that the IRR and NPV figures yield different recommendations. Can you explain this?
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