Question: Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -$20,000 -$20,000 1 8,800 10,500 2 9,100 7,500 3 9,000

Consider the following two mutually exclusive projects:

Year Cash Flow (X) Cash Flow (Y)

0 -$20,000 -$20,000

1 8,800 10,500

2 9,100 7,500

3 9,000 8,800

Instruction:

Sketch the NPV profiles for X and Y over a range of discount rates from 0% to 25% (with 5% interval). What is the crossover rate for these two projects (when both projects have the same NPV)? Show your steps.

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