Question: A firm is considering two projects, A and B. Each project will last for 4 years. The projects are MUTUALLY EXCLUSIVE. The projected cash flows

A firm is considering two projects, A and B. Each project will last for 4 years. The projects are MUTUALLY EXCLUSIVE. The projected cash flows for each project are shown below:

Year 0 1 2 3 4

Project A -18.00 8.00 7.00 6.00 4.00

Project B -30.00 10.00 11.00 11.00 15.00

The cost of capital facing the firm is 7.00%.

Assume that the projects are MUTUALLY EXCLUSIVE. Which project would the IRR rule tell you to select? (A, B, BOTH, NONE)

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