Given the below after-tax cash flow for two mutually exclusive proposed projects

Question

Given the below after-tax cash flow for two mutually exclusive proposed projects, which proposed project would you choose if the WACC is 7.39%.

Year          0            1            2            3             4

A          -200         80          80           80           80

B          -200       100         100         100            0

NPV(A) > NPV(B), choose A

NPV(B) > NPV(A), choose B

NPV(A) < 0, NPV(B) < 0, choose neither

NPV(A) = NPV(B), choose either

NPV(A) > NPV(B), choose A

NPV(B) > NPV(A), choose B

NPV(A) < 0, NPV(B) < 0, choose neither

NPV(A) = NPV(B), choose either

Explanation / Answer

NPV (A) > NPV(B), choose A.

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