Project A & B are mutually exclusive projects. You have been given the following project details and have been asked to use both the NPV and IRR methods in deciding which project to select:

Period Project A Project B

$ $

0 -5,000 -100,000

1 3,500 65,000

2 3,500 65,000

Internal rate 25.7% 19.5%

of return (IRR)

Based on a 15% discount rate which of the following is definitely a true statement?

Select one:

A.

The best project to accept is project B as it has the highest total dollar cash flows.

B.

Project A should be selected as it has the higher IRR

C.

NPV for project B will be lower than A so accept B

D.

NPV for project A will be lower than B so accept B