Question

In: Finance

QUESTION 21 Bravossi Inc. has two projects with the following cash flows: Year Project 1 Project...

QUESTION 21

  1. Bravossi Inc. has two projects with the following cash flows:

Year

Project 1

Project 2

0

(3,000.00)

(2,400.00)

1

1,000.00

1,500.00

2

??

800.00

3

1,500.00

??

4

1,800.00

1,400.00

IRR

26.2307%

33.8369%


  1. What is the crossover rate?

a.

8.4261%

b.

8.2041%

c.

7.6739%

Solutions

Expert Solution

PV FACTOR SHORT CUT :

FOR 26.2307%

FIRST YEAR = 1/(1+0.262307) = 0.7922

SECOND YEAR = 1/(1+0.262307)^2 = 0.6276

SAME WAY FOR OTHER YEARS AND OTHER PROJECT


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