2 3 Here are the cash flows for two mutually exclusive projects: Project A: -20,000 today: +8,000 in year 1: +8,000 in year 2: +8,000 in year 3. Project B: -20,000 today: 0 in year 1:0 in year 2: +25,000 in year 3. 5 6 At what interest rate would you prefer project A to B? 8 9 1) If the discount rate is above 4%. 2) A is never preferred to B at any discount rate. 11 12 3) of the discount rate is below 3%. 14 15 4) If the discount rate is above 3%