Below are two after-tax cash flows for two proposed projects, K and T. If WACC =

Question

Below are two after-tax cash flows for two proposed projects, K and T. If WACC = 8.68%, which project(s) would be acceptable?

Year          0             1              2             3

K          -20,000     8,000      8,000      8,000

T          -20,000          0             0        25,000

NPV(K) > 0, acceptable; NPV(T) > 0, acceptable

NPV(K) > 0, acceptable; NPV(T) < 0, reject

NPV(K) < 0, reject; NPV(T) > 0, acceptable

NPV(K) < 0, reject; NPV(T) < 0, reject

NPV(K) > 0, acceptable; NPV(T) > 0, acceptable

NPV(K) > 0, acceptable; NPV(T) < 0, reject

NPV(K) < 0, reject; NPV(T) > 0, acceptable

NPV(K) < 0, reject; NPV(T) < 0, reject

Explanation / Answer

true answer is

NPV(K) < 0, reject; NPV(T) > 0, acceptable

NPV(K) < 0, reject; NPV(T) > 0, acceptable

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