Question: Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -24,066 -24,066 1 10,620 12,066 2 10,900 9,660 3 10,800

  1. Consider the following two mutually exclusive projects:

Year

Cash Flow (X)

Cash Flow (Y)

0

-24,066

-24,066

1

10,620

12,066

2

10,900

9,660

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%). 4 Marks
  2. Calculate the IRR of the projects. 1 Mark
  3. What is the relationship between NPV and IRR for your values? 2 Marks
  4. What is the crossover rate for these two projects and what it indicates for your values? 1+2 Marks

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