Question: Question 7: (15 points) (Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive projects with the following projected
Question 7: (15 points) (Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows:
| Year | Project A Cash Flow | Project B Cash Flow |
| 0 | $(110,000) | $(110,000) |
| 1 | 30,000 | 0 |
| 2 | 30,000 | 0 |
| 3 | 30,000 | 0 |
| 4 | 30,000 | 0 |
| 5 | 30,000 | 210,000 |
If the appropriate discount rate on these projects is 11 percent, which would be chosen and why? (Round to the nearest cent.)
| a. The NPV of Project A is: | $ |
| b. The NPV of Project B is: | $ |
Which project would be chosen and why? (Select the best choice below.)
a. Cannor choose without comparing their IRRs.
b. Choose A because its NPV is higher.
c. Choose both because they both have positive NPVs.
d. Choose B because its NPV is higher.
Answer:
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