Question: Carlson Inc. is considering two mutually exclusive projects. Project 1 has an initial outlay of $50,000 and is expected to generate an annual cash flow

  1. Carlson Inc. is considering two mutually exclusive projects. Project 1 has an initial outlay of $50,000 and is expected to generate an annual cash flow of $10,000 per year for the next 7 years. Project 2 has an upfront cost of $75,000 and is anticipated to generate a cash flow of $14,000 per year for the next 7 years. The required return for these projects is 11%. Which project(s) should the company pursue based on NPV?

    Project 1

    Project 2

    Projects 1&2

    Neither Project 1 nor Project 2.

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