Question: Exhibit 3. GHI Inc. is considering two projects, A and B whose cash flows in millions of dollars are equally risky and not repeatable. The

Exhibit 3. GHI Inc. is considering two projects, A and B whose cash flows in millions of dollars are equally risky and not repeatable. The total budget for investment is $9 million and the WACC is 20%.

Year	0	1	2	3	4
CF A	$4	$2	$3	$2.5	$1.5
CF B	$7	$4	$6	$3	- $0.5

6. Refer to Exhibit 3. If projects A & B were mutually exclusive, what is the crossover rate? (Yes, it does exist and we can have more than one sign change for cash flow differentials because they aren't measuring cash flows, they are measuring the differences in cash flows.). What does the crossover rate specifically tell management of GHI and how will this change the decision made in #5 above?

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