Question: company is evaluating two mutually exclusive projects, A and B. The relevant cash flows for each project are given in the table below. Project A
company is evaluating two mutually exclusive projects, A and B. The relevant cash flows for each project are given in the table below.
|
| Project A | Project B |
| Initial Investment | $350,000 | $425,000 |
| Year | Cash Inflows | |
| 1 | $140,000 | $175,000 |
| 2 | $165,000 | $150,000 |
| 3 | $190,000 | $125,000 |
| 4 | $100,000 |
|
| 5 | $75,000 |
|
| 6 | $50,000 |
|
The cost of capital for use in evaluating each of these equally risky projects is 10 percent.Which project should the company choose using the suitable capital budgeting technique for such evaluation?
| a. Project A | ||
| b. Project B | ||
| c. Both projects | ||
| d. None |
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