You are considering the following two mutually exclusive projects with the following cash flows. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value.

YearProject AProject B0-45000$-40000$117500$8200$218000$14600$322500$36800$

Project AProject Brequired rate of return8%12%required payback period2 years2 yearsrequired accounting return8.5%9.5%

Q1 : You should accept Project _____ because its net present value exceeds that of the other project by _____

1. 778.11
2. 897.13
3. 656.94
4. 418.02
5. 813.27

Hint: you need to calculate the NPV for each project

Q2 : You should accept Project _____ because its internal rate of return (IRR) is _____ percent.

1. Project B; 13.92
2. The IRR should not be used to determine which of these projects should be accepted.
3. Project A; 14.67
4. Project A; 13.22
5. Project B; 17.79