Project I Has an Initial Cash Outflow of $18,300 and Annual

question 39

Multiple Choice

Project I has an initial cash outflow of $18,300 and annual cash flows of $8,700 for Years 1 to 3.Project II has an initial cash outflow of $25,400 and annual cash flows of $10,500 for Years 1 to 3.These projects are mutually exclusive.The required rate of return is 11 percent.Based on the incremental NPV_{(II - I)} which project(s) should be accepted and why?

• A)Project II;because the incremental NPV_{(II - I)} is negative.
• B)Project I;because both the incremental NPV_{(II - I)}and NPV_I are positive.
• C)Both Project I and II;because both project NPVs are positive.
• D)Project II;because it has the larger NPV.
• E)Project I;because the incremental NPV_{(II - I)} is negative and NPV_I is positive.

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