Suppose Canadian Space Flight Group Has Two Mutually Exclusive Projects

question 83

Essay

Suppose Canadian Space Flight Group has two mutually exclusive projects: space flight using an Airbus and space flight using a Bombardier aircraft.Project Airbus requires an initial cash outlay of $325,000 and is expected to provide after-tax cash flows of $60,000 in year 1,$80,000 in year 2,$150,000 in year 3,and $180,000 in year 4.Project Bombardier requires an initial cash outlay of $250,000 and is expected to provide after-tax cash flows of $70,000 in year 1,$100,000 in year 2,$120,000 in year 3,and $70,000 in year 4.The appropriate discount rate is 12 percent.
A) Find the IRRs of both projects.
B) Find the crossover rate of the two projects.
C) Which project should be accepted using the information in (B)? Why?

• A) Find the IRRs of both projects.
• B) Find the crossover rate of the two projects.
• C) Which project should be accepted using the information in (B)? Why?

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Definitions:

Political Unrest

A state of disagreement or conflict within a country involving its government, often leading to protests, strikes, or even violence.

Qualitative Forecasting

A forecasting method that relies on expert judgments and non-quantifiable information to predict future outcomes.

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Unique skills or knowledge in a particular field, making an individual or organization capable of performing tasks that require specialized understanding.

Quantitative Forecasting

A statistical approach to predict future events or outcomes based on numerical data and analysis.