Question: a firm must choose between two mutually exclusive projects, a & b. project a has an initial cost of $10000. its projected net cash flows
a firm must choose between two mutually exclusive projects, a & b. project a has an initial cost of $10000. its projected net cash flows are $800, $2000, $3000, $4000, and $5000 at the end of years 1 through 5, respectively. project b has an initial cost of $14000, and its projected net cash flows are $7000, $5000, $3000, $2000, and $1000 at the end of years 1 through 5, respectively. the firms cost of capital is 6.00%. choose the correct statement:
A the npv and the irr criteria provide the same ranking of these two projects.
B the npv criterion recommends project a while the irr criterion recommends project b.
C the npv criterion recommends project b while the irr criterion recommends project a.
D the npv and irr criteria provide different rankings, but suggest that both projects should be taken.
E the npv and irr criteria provide the same ranking, but suggest that both projects should be taken.
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
