Question: Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -24,080 -24,080 1 10,020 12,080 2 10,900 9,060 3 10,800

  1. Consider the following two mutually exclusive projects:

Year

Cash Flow (X)

Cash Flow (Y)

0

-24,080

-24,080

1

10,020

12,080

2

10,900

9,060

3

10,800

10,400

  1. Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent (take 0%, 5%, 10%, 15%, 20%, 25%).
  2. Calculate the IRR of the projects.
  3. What is the relationship between NPV and IRR for your values?

What is the crossover rate for these two projects and what it indicates for the values?

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