You Are Considering the Following Two Mutually Exclusive Projects That

question 57

Multiple Choice

You are considering the following two mutually exclusive projects that will not be repeated.The required rate of return is 11.25% for project A and 10.75% for project B.Which project should you accept and why? $\begin{array}{cccl}\underline{\text { Year } }&\underline{\text { Project A }}& & \underline{\text { Project B }} \\0 &-\$ 48,000 & & -\$ 126,900 \\1 &\$ 18,400 & & \$ 69,700 \\2 & \$ 31,300 & & \$ 80,900\\3 & \$ 11,700 & & \$ 0\\\end{array}$

• A)project A; because its NPV is about $335 more than the NPV of project B.
• B)project A; because it has the higher required rate of return.
• C)project B; because it has the largest total cash inflow.
• D)project B; because it returns all its cash flows within two years.
• E)project B; because it is the largest sized project.

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Small-Business

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