The discount rate that equates the net present value (NPV) of two investments or more (by discounting their cash flows at that rate). Suppose there are two projects, A and B, then:
At crossover discount rate: NPV(A) = NPV(B)
It is calculated by equating the cash flows of the two projects applying the same rate (Rc), which is the only unknown parameter in the equation.
The crossover discount rate could be calculated using benefit or cost streams. It is often applied to the cost streams of mutually exclusive projects/ investments.
