Projects a and B Both Have an Initial Outflow of $100,000.Project

question 52

Multiple Choice

Projects A and B both have an initial outflow of $100,000.Project A will return a cash flow of $30,000 each year for the next 5 years.Project B will return $40,000 in year 1, $30,000 in year 2, $30,000 in year 3, $30,000 in year 4, and $20,000 in year 5.Which project will have the higher net present value?

• A)Project A
• B)Project B
• C)The answer cannot be determined without knowing the required rate of return.
• D)The answer cannot be determined without knowing the initial investment.

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