Question: Consider two mutually exclusive projects with the following cash flows: Project A Project B Time 0 -10,000 -10,000 Time 1 5,000 4,000 Time 2 5,000

Consider two mutually exclusive projects with the following cash flows:

Project A

Project B

Time 0

-10,000

-10,000

Time 1

5,000

4,000

Time 2

5,000

3,000

Time 3

2,000

6,000

At a cost of capital of 8%, which project should the company choose? Explain which decision rule you should use in this case. (6 marks)

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