Two mutually exclusive projects have the following projected cash flows:<?xml:na

Question

Two mutually exclusive projects have the following projected cash flows:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Project A Project B

Year Cash Flow Cash Flow

0 -$50,000 -$50,000

1 15,625 0

2 15,625 0

3 15,625 0

4 15,625 0

5 15,625 99,500

If the required rate of return on these projects is 10%, which would be chosen and why?

Answer

a. Project B because it has the higher NPV.

b. Project B because it has the higher IRR.

c. Project A because it has the higher NPV.

d. Project A because it has the higher IRR.

e. Neither, because both have IRRs less than the cost of capital.

a. Project B because it has the higher NPV.

b. Project B because it has the higher IRR.

c. Project A because it has the higher NPV.

d. Project A because it has the higher IRR.

e. Neither, because both have IRRs less than the cost of capital.

Explanation / Answer

Hi,

Option A is correct.

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.