Question: A firm is evaluating two projects that are mutually exclusive with initialinvestments and cash flows as follows: Project A: Initial Investment = $40,000 EOY cash

A firm is evaluating two projects that are mutually exclusive with initialinvestments and cash flows as follows:

Project A:

Initial Investment = $40,000

EOY cash flows for years 1-3 are $20,000 each

Project B:

Initial Investment = $90,000

EOY cash flows for years 1-3 are $40,000, $40,000, and $80,000 respectively.

The required rate of return is 15%. Using NPV, which project is recommended? Or both? Why?

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