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Ferri Chemical Company is considering Projects A and B with the cash flows shown below. The firm's WACC is 9%. There have been discussions within the company about which capital budgeting decision rule should be used to determine the better project. A staff person has suggested that the crossover rate should be calculated so the firm has more information. What is the crossover rate for these two projects? In other words, at what discount rate are the NPVs of these two projects equal?
0 1 2 3 4 5
Project A -$1,750 $690 $360 $325 $175 $160
Project B -$2,000 $200 $275 $675 $725 $550
Let 10%, $100 rS , 6 month 110 call $6.52, 6 month 120 Call $3.67, 6 month 90 put $2.64, 6 month 100 put $6.03 Find the price range such that you make money 6 months later under each of the following cases. (Don't forget time value.) a) long 1 share ..
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