Results 1 to 2 of 2

Thread: crossover rate

  1. #1
    Sep 2010

    crossover rate

    i was working on this problem and I found the NPV and the IRR but I dont know how to calculate the cross-over rate..can anyone tell me how to calculate a cross-over rate?

    1. Consider the following cash flows from two mutually exclusive projects below:

    Calculate the NPV and IRR of each project. Next, calculate the cross-over rate, or the discount where we are indifferent between the two projects (Fisher’s Intersection). Assume a discount rate of 10%. Which project would you recommend? Be sure to draw a graph to illustrate your answer.

    Project Q Project P
    -$1000 -$8000
    200 1200
    800 3600
    350 5500
    Follow Math Help Forum on Facebook and Google+

  2. #2
    MHF Contributor
    May 2010
    The crossover rate is he discount rate at which the NPV of both contracts is the same.

    Unless you feel like solving a cubic, you can use trial and error to find the crossover rate.

    Alternatively (and equivalently) you could find the IRR of the following Hypothetical Project:
    (Project Q) - (Project P) = 7000,-1000,-2800,-5150

    When i did it i got 10.6%.
    Follow Math Help Forum on Facebook and Google+

Similar Math Help Forum Discussions

  1. Crossover rate - How to solve r?
    Posted in the Algebra Forum
    Replies: 5
    Last Post: Oct 12th 2011, 02:38 PM
  2. Communication channel: baud rate, bit rate, etc.
    Posted in the Math Topics Forum
    Replies: 2
    Last Post: Jul 3rd 2011, 08:16 AM
  3. Crossover design
    Posted in the Advanced Statistics Forum
    Replies: 0
    Last Post: Feb 17th 2011, 06:32 AM
  4. Finding crossover points of 2 trig functions
    Posted in the Trigonometry Forum
    Replies: 2
    Last Post: Apr 24th 2007, 12:49 AM
  5. Calculus and shapes crossover question! Help!!
    Posted in the Calculus Forum
    Replies: 8
    Last Post: Dec 27th 2006, 06:25 AM

Search tags for this page

Search Tags

/mathhelpforum @mathhelpforum