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Suppose that there are two projects available to a corporation; the cash flows are given in the following table:

Year Project A Project B

0 -$20,000 -$40,000

1 $3,000 $10,000

2 $4,000 $8,000

3 $5,000 $7,000

4 $6,000 $12,000

5 $7,000 $9,000

a) What is the cross-over rate between the two projects?

b) Determine the cost of capital at which the NPV of project A is zero.

c) Determine the cost of capital at which the NPV of project B is zero.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M943046

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