2. Problem 11.10 (Capital Budgeting Criteria: Mutually Exclusive Projects)

A firm with a WACC of 10% is considering the following mutually exclusive projects: 0 1 2 3 4 5 Project 1 Project 2 -$500 -$500 $45 $200 $45 $200 $45 $150 $230 $150 $230 $150 Which project would you recommend? Select the correct answer. a. Project 2, since the NPV2 > NPV1. Ob. Neither Project 1 nor 2, since each project's NPV 0. O d. Project 1, since the NPV1 > NPV2. Oe. Both Projects 1 and 2, since both projects have NPV's > 0