accept project A as it always has the higher NPV accept project B as it always h

Question

accept project A as it always has the higher NPV accept project B as it always has the higher NPV accept A at 8.5 percent and B at 13 percent accept B at 8.5 percent and A at 13 percent accept B at 8.5 percent and neither at 13 percent You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? accept project A as it always has the higher NPV accept project B as it always has the higher NPV accept A at 8.5 percent and B at 13 percent accept B at 8.5 percent and A at 13 percent accept B at 8.5 percent and neither at 13 percent

Explanation / Answer

NPV at 8.5%
Project A= -80000+31000/1.085+31000/1.085^2+31000/1.085^3= -825.3065
Project B=-80000+110000/1.085^3=6119.891

NPV at 13 %
Project A= -80000+31000/1.13+31000/1.13^2+31000/1.13^3=-6804.2695

Project B=-80000+110000/1.13^3= -3764.4821

So,accept B at 8.5 percent and neither at 13 percent

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