A firm with a cost of capital of 13 percent is evaluating three capital projects

Question

A firm with a cost of capital of 13 percent is evaluating three capital projects. The internal rates of return are as follows:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Project Internal Rate of Return

1 12%

2 15

3 14

The firm should __________.
(hint: Positive NPV is the key)

Answer

A) accept Project 2 and reject Projects 1 and 3

B) accept Projects 2 and 3 and reject Project 1

C) accept Project 1 and reject Projects 2 and 3

D) accept Project 3 and reject Projects 1 and 2

A) accept Project 2 and reject Projects 1 and 3

B) accept Projects 2 and 3 and reject Project 1

C) accept Project 1 and reject Projects 2 and 3

D) accept Project 3 and reject Projects 1 and 2

Explanation / Answer

b is the answer

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