Projects a and B Are Mutually Exclusive

question 106

Multiple Choice

Projects A and B are mutually exclusive. Project A costs $20,000 and is expected to generate cash inflows of $7,500 for 4 years. Project B costs $10,000 and is expected to generate a single cash flow in year 4 of $20,000. The cost of capital is 12%. Which project would you accept and why?

• A) Project B because it has the higher NPV
• B) Project B because it has the higher IRR
• C) Project A because it has the higher NPV
• D) Project A because it has the higher IRR

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