Question

You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash​ flows:

YEAR   PROJECT A CASH FLOW   PROJECT B CASH FLOW
0 ------------- -100,000 ---------------   -100,000
1 --------------- 33,000 --------------- 0
2 --------------- 33,000 --------------- 0
3 --------------- 33,000 --------------- 0
4 --------------- 33,000 --------------- 0
5 --------------- 33,000 --------------- 210,000

If the appropriate discount rate on these projects is 12 percent, which would be chosen and why?

1. What is the NPV of project​ A?

____(round to the nearest cent.)

2. What is the NPV of project​ B?

____(round to the nearest cent.)

3. Which project would be chosen and​ why?

a. Choose A because its NPV is higher

b. Choose B because its NPV is higher

c. Choose both because they both have positive NPVS.

d. Cannot choose without comparing their IRRS

Answer 1