Question: answers is given but how do we do this? Question No 3 (7 marks) The Belleville Railway Tunnel is considering two potential expansion projects. The

answers is given but how do we do this? Question No

answers is given but how do we do this?

Question No 3 (7 marks) The Belleville Railway Tunnel is considering two potential expansion projects. The projects are mutually exclusive and have the following cash flows. At what range of discount rates (if any) would you accept project A, at what range of discount rates (if any) would you accept project B, and at what range of discount rates (if any) would you reject both projects? | Year Project A Project B 0 -$500 -$1050 $590 $590 2. $0 $590 Solution $130 $90 NPV 3.57% IRR Project A = 18.00% IRR Project B = 8.15% IRR Project B-A (Cross Over Point) = 3.57% Ifr 3.57% &r 18.00% Reject Both Projects Choose Choose A 18% 8.15% Choose Neither Project A Project B Question No 3 (7 marks) The Belleville Railway Tunnel is considering two potential expansion projects. The projects are mutually exclusive and have the following cash flows. At what range of discount rates (if any) would you accept project A, at what range of discount rates (if any) would you accept project B, and at what range of discount rates (if any) would you reject both projects? | Year Project A Project B 0 -$500 -$1050 $590 $590 2. $0 $590 Solution $130 $90 NPV 3.57% IRR Project A = 18.00% IRR Project B = 8.15% IRR Project B-A (Cross Over Point) = 3.57% Ifr 3.57% &r 18.00% Reject Both Projects Choose Choose A 18% 8.15% Choose Neither Project A Project B

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