Calculate the cross-over rate

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Question 1: Consider the following two projects for Copper Mountain Sports. Both project are projected to produce cash flows for 5 years at which time the equipment will have become technologically obsolete. For these projects, calculate the "cross-over rate". The cross -over rate is the discount rate where both projects would have the same NPV.

Year

Snow Shoes

Snowmobiles

0

-$250,000

-$250,000

1

$25,000

$150,000

2

$80,000

$160,000

3

$200,000

$75,000

4

$190,000

$50,000

5

$150000

$5000

[A] 10.55%

[B] 33.67%

[C] These two projects do not have a cross-over rate

[D] 30.52%

[E] 32.30%

Reference no: EM132659044

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