A B B since A\'s NPV is higher A since B\'s PBP is lower Neither A nor B Questio

Question

A
B
B since A's NPV is higher
A since B's PBP is lower
Neither A nor B

Question 14. 14. Enjam Loving, Inc., is considering two mutually exclusive projects. Project A and Project B both have an initial outlay of $500. The cash flows from project A (in dollars) are: 100 in year 1, 200 in year 2, 300 in year 3 and 400 in year 4. Project B pays 400 dollars in year 1, 300 dollars in year 2, 200 dollars in year 3 and 100 dollars in year 4. Loving uses both NPV and Simple payback period criterion for decision making. Assuming a cost of capital of 6%, which project would the company choose? (Points : 3)

Explanation / Answer

B since company B has a higher yearly cash flow

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