Question: A company is considering two separate, mutually exclusive projects A and B. Project A requires an initial investment of $100,000 and is expected to generate

A company is considering two separate, mutually exclusive projects A and B. Project A requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $15,000 per year forever. Project B requires an initial investment of $150,000 and is expected to generate after-tax cash flows of $18,000 per year forever. The appropriate discount rate is 10 percent. What is the crossover rate for projects A and B?

A) 5.00% B) 6.00% C) 9.00% D) There is no crossover point

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