Question: D company is considering the following mutually exclusive projects: Project C Project D Year Cash Flow Cash Flow 0 -$5,500 -$5,500 1 200 4,000 2

D company is considering the following mutually exclusive projects:

Project C Project D

Year Cash Flow Cash Flow

0 -$5,500 -$5,500

1 200 4,000

2 800 3,000

3 4,000 800

4 5,000 200

  • At what cost of capital will the net present value of the two projects be the same? (That is, what is the crossover rate?)

  • Calculate each projects IRR.

  • Calculate the NPV for both projects using WACC = 10%, and again for WACC = 20%. For each WACC, which one would you choose, A or B? Is each choice consistent with a decision based on IRR?
  • SHOW WORK PLEASE

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