Question: You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What
You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent? Project A: Year 0 Cash outflow ($80,000) Year 1 Cash inflow 32,000 Year 2 Cash inflow 32,000 Year 3 Cash inflow 32,000 Project B: Year 0 Cash outflow ($80,000) Year 1 Cash inflow 0 Year 2 Cash inflow 0 Year 3 Cash inflow 105,000 1. accept project A as it always has the higher NPV 2. accept project B as it always has the higher NPV 3. accept A at 8.5 percent and B at 13 percent 4. accept B at 8.5 percent and A at 13 percent 5. accept B at 8.5 percent and neither at 13 percent
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