Project A has an IRR of 12% and project B has an IRR of 9%. The crossover rate for these projects is 6.9%. You use the NPV rule for making project selections. If both the projects have a cost of capital of 10.4% and the projects are independent with normal cash flows, you should:
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A. B. C. D.D
Note that the crossover rate is unimportant here since the projects are independent, not mutually exclusive. Hence, you should select all projects with positive
NPV. In this case, since A has an IRR greater than the cost of capital and it has normal cash flows, it has a positive NPV. Project B's IRR exceeds the cost of capital and hence has negative NPV. Therefore, you should select A and reject B.