You Are Considering Two Independent Projects with the Following Cash

question 78

Multiple Choice

You are considering two independent projects with the following cash flows.The required return for both projects is 10%.Given this information, which one of the following statements is correct? $\begin{array}{lll}\underline{\text { Year} } & \underline{\text { Project A }} &\underline{ \text { Project B }} \\ 0 & -\$ 950,000 & -\$ 125,000 \\1 & \$ 330,000 & \$ 55,000 \\2 & \$ 400,000 & \$ 50,000 \\3 & \$ 450,000 & \$ 50,000\end{array}$

• A)You should accept project B since it has the higher IRR and reject project A because you can not accept both projects.
• B)You should accept project A because it has the lower NPV and reject project B.
• C)You should accept project A because it has the higher NPV and you can not accept both projects.
• D)You should accept project B because it has the higher IRR and reject project A.
• E)You should accept both projects if the funds are available to do so since both NPV's are > 0.

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Definitions:

Number Format

A setting that determines how numbers are displayed, such as decimal places, currency symbols, or percentages.

Format Cells Dialog Box

A feature in spreadsheet software allowing users to change cell appearance, including formats for numbers, text, borders, and colors.

Decimal Places

The number of digits to the right of the decimal point in a number, indicating its precision.

Fill Handle

A tool in spreadsheet software used to automatically fill in cells with data based on the pattern of existing data.