Question: Consider Projects A and B, with net cash flows as follows: ---- Net Cash Flows ---- Project A Project B Initial Cost at T-0 (Now)

Consider Projects A and B, with net cash flows as follows:

---- Net Cash Flows ----

Project A Project B

Initial Cost at T-0 (Now) ($30,000) ($50,000)

cash inflow at the end of year 1 10,000 6,000

cash inflow at the end of year 2 8,000 16,000

cash inflow at the end of year 3 5,000 25,000

a. Construct NPV Profiles for these two projects.

b. If the two projects were mutually exclusive, which would you accept if your firms cost of capital were 4%? Which would you accept if your firms cost of capital were 8%?

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