The Commodore Co. is trying to decide between the following two mutually exclusive projects:

Cash Flows
Year	Project I	Project II
0	-$18,000	-$18,000
1	$8,500	$9,000
2	$9,000	$8,400
3	$9,500	$9,400

The only requirement the company has is that any project that is accepted must produce a minimum rate of return of 11%. What should the company do and why?

Multiple Choice

• Both projects should be accepted because they have IRRs of 22.87% and 28.45%, which exceed the 11% requirement.

• Both projects should be accepted because they both have positive NPVs.

• Project I should be accepted because it has an NPV of $3,908.58. Project II cannot also be accepted.

• Project II should be accepted because it has an IRR of 28.45%, which is greater than Project I's IRR.

• Both projects should be accepted because their payback periods are only about 2 years.