Two Projects Being Considered Are Mutually Exclusive and Have the Following

question 39

Multiple Choice

Two projects being considered are mutually exclusive and have the following cash flows: $\begin{array}{lll}\underline{\text { Year }} & \underline{\text { Project A}} &\underline{\text { Project B}}\\0 & -\$ 50,000 & -\$ 50,000 \\1 & 15,625 & 0 \\2 & 15,625 & 0 \\3 & 15,625 & 0 \\4 & 15,625 & 0 \\5 & 15,625 & 99,500\end{array}$ If the required rate of return on these projects is 10 percent, which would be chosen and why?

• A)Project B because of higher NPV.
• B)Project B because of higher IRR.
• C)Project A because of higher NPV.
• D)Project A because of higher IRR.
• E)Neither, because both have IRRs less than the cost of capital.

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