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You are analyzing the following two projects and have developed the following information.
Project A | Project B
Year | Cash flow | Cash flow
0 | -$50,000 | -$50,000
1 | $31,000 | $42,000
2 | $26,000 | $21,000
3 | $27,000 | $18,000
5. What is the crossover rate of the two projects?
6. Project A and B are mutually exclusive. Which project(s) should be chosen if the required return is 8%? Why?
7. Project A and B are independent. Which project(s) should be chosen if the required return is 8%? Why?
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