Question: You are asked to evaluate the following two projects for Miami Hospital using a cost of capital of 10%: Year Project A ($50,000 Investment) Project

You are asked to evaluate the following two projects for Miami Hospital using a cost of capital of 10%:

Year Project A ($50,000 Investment) Project B ($60,000 Investment)

1 $15,625 $20,000

2 15,625 $15,000

3 15,625 $15,000

4 15,625 $10,000

5 15,625 $20,000

Which would you recommend and why?

Project B because of higher NPV.

Project B because of shorter payback.

Project A because of higher NPV.

Neither, because both have IRRs less than the required return.

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