You Are Considering Two Mutually Exclusive Projects

question 101

Multiple Choice

You are considering two mutually exclusive projects. Project A has cash flows of −$72,000, $21,400, $22,900, and $56,300 for Years 0 to 3, respectively. Project B has cash flows of −$81,000, $20,100, $22,200, and $74,800 for Years 0 to 3, respectively. Both projects have a required 2.5-year payback period. Should you accept or reject these projects based on payback analysis?

• A) Accept Project A and reject Project B
• B) Reject Project A and accept Project B
• C) Accept both Projects A and B
• D) Reject both Projects A and B
• E) You cannot apply the payback method to these projects.

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