AA firm is evaluating two projects that are mutually exclusive with initial

investments and cash flows as follows:

Project: A Project: B

_____________________________ _____________________________

Initial End?of?Year Initial End?of?Year

Investment Cash Flows Investment Cash Flows

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$40,000 20,000 $90,000 $40,000

20,000 40,000

20,000 80,000

The financial analyst determines that the firm's required rate of return is 15%. His recommendation using NPV would be to

A. select both

B. select project A and reject B.

C. reject project A and select B.

D. reject both.