Question

swenson's is considering two mutually exclusive projects, projects a and b, and has determined that the crossover rate for these projects is 11.7 percent and the required return for both projects is 9 percent. given this you know that:

Answer 1

The project that is favored at an 11% discount rate is the antithesis of the project that is favoured with a 12% discount rate.

While the other project would be acceptable below the crossover rate, one would be acceptable above it. WHY?

• This is because the internal rate of return (IRR) of one project crosses the IRR of another project at the crossover rate on the net present value profile.
• Also, as 12% is greater than the discount rate of 11.7%, the NPV of a different project will be higher at that rate.
• The project that is favored at an 11% discount rate is the antithesis of the project that is favoured with a 12% discount rate.

The complete question is,

Swenson's has calculated that the crossover rate for the two projects A and B, which are mutually exclusive, is 11.7%. Given this, you can be certain of the following:

a. The preferred project at a discount rate of 11% will be the opposite project from the preferred project with a discount rate of 12%.

b. At discounts rates higher than 11.7%, both projects have a negative net present value.

c. At a discount rate of 11.7%, the NPV of both projects is zero.

If the discount rate falls below 11.7%, neither project will be approved.      

To learn more about  Internal rate of return (IRR) refer to:

https://brainly.com/question/13373396

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