Projects A and B are mutually exclusive. Project A costs $10,000 and is expected

Question

Projects A and B are mutually exclusive. Project A costs $10,000 and is expected to generate cash inflows of $4,000 for 4 years. Project B costs $10,000 and is expected to generate a single cash flow in year 4 of $20,000. The cost of capital is 12%. Which project would you accept and why? Project B because it has the higher NPV. Project B because it has the higher IRR. Project A because it has the higher NPV. Project A because it has the higher IRR. Project B because it has the higher NPV. Project B because it has the higher IRR. Project A because it has the higher NPV. Project A because it has the higher IRR. Project B because it has the higher NPV. Project B because it has the higher IRR. Project A because it has the higher NPV. Project A because it has the higher IRR.

Explanation / Answer

Project B because it has the higher NPV.

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