We have two independent and mutually exclusive projects, A and B. Project A requires an initial investment of $1000, and will yield $500 of cash inflows for the next three years. Project B requires an initial investment of $3,500, and will yield $1,000 of cash inflows for the next five years. The required return on both projects is 10%.

The NPV of Project A is 243.43

The NPV of Project B is 291.00

What is the problem with using the NPV investment criterion in this case? What alternative criterion should be used?

Answer rating: 100% (QA)

The problem with using the NPV Net Present Value criterion in this case is that it doesnt consider t... View the full answer