Question: Ace Barker Inc. is evaluating two mutually exclusive projects: A and B. The initial investment for each project is $42,000. Project A will generate cash
Ace Barker Inc. is evaluating two mutually exclusive projects: A and B. The initial investment for each project is $42,000. Project A will generate cash inflows equal to $15,600 at the end of each of the next five years; Project B will generate only one cash inflow in the amount of $70,000 at the end of the fifth year (i.e., no cash flows are generated in the first four years). The required rate of return of Ace Barker Inc. is 10 percent. Which project should Ace Barker Inc. purchase? Project A should be purchased because it has a higher net present value (NPV) than Project B Project A should be purchased because it will produce cash every year for five years. Neither project should be purchased, because neither has a positive net present value (NPV). Project B should be purchased because it has a positive net present value (NPV)
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