Question: You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows: YEAR PROJECT A CASH FLOW PROJECT B

You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows:

YEAR PROJECT A CASH FLOW PROJECT B CASH FLOW 0 ------------- -100,000 --------------- -100,000 1 --------------- 33,000 --------------- 0 2 --------------- 33,000 --------------- 0 3 --------------- 33,000 --------------- 0 4 --------------- 33,000 --------------- 0 5 --------------- 33,000 --------------- 210,000

If the appropriate discount rate on these projects is 12 percent, which would be chosen and why?

1. What is the NPV of project A?

____(round to the nearest cent.)

2. What is the NPV of project B?

____(round to the nearest cent.)

3. Which project would be chosen and why?

a. Choose A because its NPV is higher

b. Choose B because its NPV is higher

c. Choose both because they both have positive NPVS.

d. Cannot choose without comparing their IRRS

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