question 1

Consider the following two projects:

Time Cash Flows

A B

0 -$4,000 -$4,000

1 $2,003 $0

2 $2,003 $0

3 $2,003 $0

4 $2,003 $10,736

Assuming a 14 percent discount rate, which project would you prefer?

Hint: Use NPV method

	I.	Project B, because it has a higher NPV
	II.	None of the above
	III.	Project A, because it has a higher NPV
	IV.	Project A, because it has a higher IRR
	V.	Project B, because it has a higher IRR