Question: A firm must choose between two mutually exclusive projects with the following cash flows: Year Project A Project B 0 -$75,000 -$38,000 1 $32,400 $17,800

A firm must choose between two mutually exclusive projects with the following cash flows: Year Project A Project B 0 -$75,000 -$38,000 1 $32,400 $17,800 2 $30,200 $14,200 3 $36,600 $19,800 Answer the following three questions, given that the firm's cost of capital is 12% p.a.: () Which project should the firm choose if it uses PI to make investment decisions? () Which project should the firm choose if it uses NPV to make investment decisions? () Which project should the firm choose? (a) Project A; Project B; Project A. (b) Project A; Project B; Project B. (c) Project B; Project A; Project A. (d) Project B; Project A; Project B.

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