Question: A corporation is considering two mutually exclusive projects. The projects have the following cash flows: Project A Project B YEAR 0 1 1,000 7,000 2

A corporation is considering two mutually exclusive projects.

The projects have the following cash flows:

Project A Project B
YEAR
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?)

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