Two Mutually Exclusive Projects Have the Following Positive NPVs and Project

question 76

Multiple Choice

Two mutually exclusive projects have the following positive NPVs and project lives. $\begin{array} { r c c } \text { Project } & \text { NPV } & \text { Life } \\\text { Project A } & \$ 5,000 & \text { 3 years } \\\text { Project B } & \$ 6,500 & \text { 5 years }\end{array}$ If the cost of capital were 15 percent, which project would you accept?

• A)Project A, because it has higher EAC
• B)Project B, because it has higher EAC
• C)Project A, because its NPV can be earned more quickly
• D)Project B, because it has higher NPV

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