Question: Wilson's Market is considering two mutually exclusive projects that will not be repeated. The required rate of return is 13.9 percent for Project A and
Wilson's Market is considering two mutually exclusive projects that will not be repeated. The required rate of return is 13.9 percent for Project A and 12.5 percent for Project B. Project A has an initial cost of $54, 500, and should produce cash inflows of $16, 400, $28, 900, and $31, 700 for Years 1 to 3, respectively. Project B has on initial cost of $69, 400, and should produce cash inflows of $0, $48, 300, and $42, 100, for Years 1 to 3, respectively. Which project, or projects, if either, should be accepted and why? Project A; because it has the higher required rate of return Project A; because its NPV is positive while Project B's NPV is negative Project B: because it has a negative NPV which indicates acceptance Project B; because It has the largest total cash inflow neither project; because neither has an NPV equal to or greater than its initial cost
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