NPV comparison between 2 projects
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The following cash flows are estimated for 2 mutually exclusive projects:
(See attached chart).
When is Project B more lucrative than Project A? (that is, over what range of costs of capital (k) does Project B have a higher NPV than Project A?) (Choose the best answer).
(Hint: calculate the crossover rate - the cost of capital that make the NPV of the 2 project equal).
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Solution Summary
The solution explains how we can use NPV profile to make a comparison between two projects.
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