Year	Project A (upgrade existing B-Wings)	Project B (develop new X-Wings)
0	-$250,000	-$400,000
1	$100,000	$50,000
2	$80,000	$70,000
3	$60,000	$80,000
4	$40,000	$120,000
5	$20,000	$200,000

The above are two mutually exclusive investment projects for Rebel Alliance. The Alliance requires getting their invested amount fully paid back within 5 years. The Alliance’s cost of capital (i.e., the required return on investment) is 6% annually.

At what discount rate would the Alliance be indifferent between the two projects?

a.4%.

b.5%.

c.6%.

d.7%

e.8%.

Answer rating: 100% (QA)

Answer Option d 7 Calculations and explanation The firm will be indifferent at that discount rate fo... View the full answer