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In: Finance

Project S requires an initial outlay at t = 0 of $20,000, and its expected cash...

Project S requires an initial outlay at t = 0 of $20,000, and its expected cash flows would be $4,500 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $46,000, and its expected cash flows would be $13,450 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend?

Select the correct answer.

a. Project S, since the NPVS > NPVL.
b. Both Projects S and L, since both projects have IRR's > 0.
c. Both Projects S and L, since both projects have NPV's > 0.
d. Project L, since the NPVL > NPVS.
e. Neither Project S nor L, since each project's NPV < 0.

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Expert Solution

jeff jeffy answered 1 year ago
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