Consider Two Projects,A and B

question 85

Multiple Choice

Consider two projects,A and B.The present value (PV) of cash inflows for project A is $55,000,while the present value of cash outflows for this project is $50,000.Project B,on the other hand,has the following characteristics: PV of cash inflows = $24,000;PV of cash outflows = $20,000.Assume that these two projects are mutually exclusive.Assume that the company has adequate capital to fund either investment option.All of the following statements are true except:

• A)The NPV of Project A is $5,000.
• B)The IRR of Project A is greater than the cost of capital (discount rate).
• C)The profitability index (PI)for Project A is 1:1.
• D)Project A is preferable to Project B (all else held constant).