You Are Considering Two Independent Projects with the Same Discount

question 23

Multiple Choice

You are considering two independent projects with the same discount rate of 11 percent.Project A costs $284,700 and has cash flows of $75,900,$106,400,and $159,800 for Years 1 to 3,respectively.Project B costs $115,000,and has a cash flow of $50,000 a year for Years 1 to 3.You have sufficient funds to finance any decision you make.Which project or projects,if either,should you accept and why?

• A)Project A; because it is the larger-sized project with a positive IRR
• B)Project A; because it has the larger NPV
• C)Neither project; because their NPVs are less than their initial costs
• D)Project B; because its IRR exceeds the discount rate
• E)Both projects; because their NPVs are both positive

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