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Project S requires an initial outlay at t = 0 of $18,000, and its expected cash...

Project S requires an initial outlay at t = 0 of $18,000, and its expected cash flows would be $4,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $29,000, and its expected cash flows would be $14,900 per year for 5 years. If both projects have a WACC of 13%, which project would you recommend? Select the correct answer.

a. Both Projects S and L, since both projects have IRR's > 0.

b. Neither Project S nor L, since each project's NPV < 0.

c. Project S, since the NPVS > NPVL.

d. Project L, since the NPVL > NPVS.

e. Both Projects S and L, since both projects have NPV's > 0.

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Expert Solution

jeff jeffy answered 2 years ago
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