Question: Two projects being considered are mutually exclusive and have the following projected cash flows: Project A Project B Year Cash Flow Cash Flow 0 -$50,000

Two projects being considered are mutually exclusive and have the following projected cash flows:

Project A Project B

Year Cash Flow Cash Flow

0 -$50,000 -$50,000

1 15,625 0

2 15,625 0

3 15,625 0

4 15,625 0

5 15,625 99,500

If the required rate of return on these projects is 10 percent, which would be chosen and why?

A.

Project B because it has the higher NPV.

B.

Project B because it has the higher IRR.

C.

Project A because it has the higher NPV.

D.

Project A because it has the higher IRR.

E.

Neither, because both have IRRs less than the cost of capital.

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