Boston Chicken is considering two mutually exclusive projects with the following cash flows. What is the crossover rate? If the required rate of return is lower than the crossover rate, which project should be accpeted?

Year Project A Project B

0 -50,000 -50,000

1 31,000 42,000

2 26,000 21,000

3 27,000 18,000

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Irving HeathcoteLv2

28 Sep 2019

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Question text Johnson Mirrors is facing the possibility of two mutually exclusive projects. They have determined that the required rate for similar projects is 11.7 percent. Project A has an internal rate of return (IRR) of 15.3 percent and Project B has an IRR of 16.5 percent. Given this information, which one of the following statements is correct? Select one:

a. Project A should be accepted as its IRR is closer to the crossover point than is Project B's IRR.

b. Project B should be accepted as it has the higher IRR.

c. Both projects should be accepted as both of the project's IRRs exceed the crossover rate.

d. Neither project should be accepted since both of the project's IRRs exceed the crossover rate.

e. You cannot determine which project should be accepted given the information provided.

Your division is considering two projects with the following cash flows (in millions):

Project A	-$11	$4	$7	$1
Project B	-$20	$12	$5	$9

What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A $ million
Project B $ million

What are the projects' NPVs assuming the WACC is 10%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A $ million
Project B $ million

What are the projects' NPVs assuming the WACC is 15%? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55.
Project A $ million
Project B $ million

What are the projects' IRRs assuming the WACC is 5%? Round your answer to two decimal places.
Project A %
Project B %

What are the projects' IRRs assuming the WACC is 10%? Round your answer to two decimal places.
Project A %
Project B %

What are the projects' IRRs assuming the WACC is 15%? Round your answer to two decimal places.
Project A %
Project B %

If the WACC were 5% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 26.71%.)

If the WACC were 10% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 26.71%.)

If the WACC were 15% and A and B were mutually exclusive, which would you choose? (Hint: The crossover rate is 26.71%.)

azureelk96

You are considering the following two mutually exclusive projects. The required rate of return is 14.6 percent for project A and 13.8 percent for project B. Which project should you accept and why?

Year Project A Project B

0 -$50,000 -$45,000

1 24,800 41,000

2 36,200 20,000

3 21,000 12,000

	1.	project A; because it has the higher required rate of return
	2.	project B; because it has the lower required return
	3.	project A; because it has the largest total cash inflow
	4.	project B; because it has the largest cash inflow in year one
	5.	project B; because its NPV is more than the NPV of project A

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