Consider the following two mutually exclusive projects:

The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct?

Multiple Choice

• A. The profitability rule implies accepting Project A.

• B. The IRR decision rule should be used as the basis for selecting the project in this situation.

• C. Because both the IRR and the PI imply accepting Project B, that project should be accepted.

• D. NPV, IRR, and PI all imply accepting Project A.

• E. Only NPV implies accepting Project A.

Consider the following two mutually exclusive projects: Year 0 Cash Flow (A) Cash Flow (B) - $317,000 - $26,500 $27,700 $9,057 $56,000 $10,536 1 2 3 $55,000 $11,849 4 $399,000 $13,814