Question: Consider the following two mutually exclusive projects X and Y: X Y Year 0 -$5,500 -$4,500 Year 1 $3,000 $2,800 Year 2 $2,000 $2,000 Year

Consider the following two mutually exclusive projects X and Y:
X
Y
Year 0
-$5,500
-$4,500
Year 1
$3,000
$2,800
Year 2
$2,000
$2,000
Year 3
$2,000
$1,000
Year 4
$1,000
$1,000
a. What is the crossover rate for these two projects?
b. Sketch the NPV profiles for X and Y (point out the IRR of each project and the crossover rate in the NPV profiles).
c. The required return is 10%. Which project should be chosen?

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