You Are Considering Two Independent Projects

question 59

Multiple Choice

You are considering two independent projects. Project A has an initial cost of $125,000 and cash inflows of $46,000, $79,000, and $51,000 for Years 1 to 3, respectively. Project B costs $135,000 with expected cash inflows for Years 1 to 3 of $50,000, $30,000, and $100,000, respectively. The required return for both projects is 16 percent. Based on IRR, you should:

• A) accept both projects.
• B) accept Project A and reject Project B.
• C) accept Project B and reject Project A.
• D) reject both projects.
• E) accept either one of the projects, but not both.