ZumBahlen Inc ​At What Cost of Capital Will the NPV of the Year

question 22

Multiple Choice

ZumBahlen Inc.is considering the following mutually exclusive projects:​​​ $\begin{array}{lrr}\text { Year } & \begin{array}{r}\text { Project A } \\\text { Cash Flow }\end{array} & \begin{array}{r}\text { Project B } \\\text { Cash Flow }\end{array} \\\hline 0 & -\$ 5,000 & -\$ 5,000 \\1 & 200 & 3,000 \\2 & 800 & 3,000 \\3 & 3,000 & 800 \\4 & 5,000 & 200\end{array}$ ​At what cost of capital will the NPV of the two projects be the same? (That is,what is the "crossover" rate?)

• A)16.15%
• B)16.74%
• C)17.33%
• D)17.80%

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Definitions:

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