Woodson Inc at What Required Rate of Return Do the Two

question 60

Multiple Choice

Woodson Inc.has two possible projects, Project A and Project B, with the following cash flows: $\begin{array}{rrr}\underline{\text { Year }} & \underline{\text { Project A }} & \underline{\text { Project B }} \\0 & -150,000 & -100,000 \\2 & 100,000 & 45,000 \\3 & 105,000 & 65,000 \\3 & 40,000 & 80,000\end{array}$ . At what required rate of return do the two projects have the same net present value (NPV) ? (In other words, what is the "crossover rate" of the projects' NPV profiles?)

• A)10.3%
• B)13.5%
• C)15.8%
• D)21.7%
• E)34.8%

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Definitions:

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