Question: Your company is considering two mutually exclusive projects, A and B , whose costs and cash flows are shown below. Project A is of average

Your company is considering two mutually exclusive projects, A and B, whose costs and cash flows are shown below. Project
A is of average risk while project B is of higher risk. Projects of average risk are analyzed using the WACC as below
indicated. Projects of higher risk are analyzed using a 3% risk premium above the WACC. Choose the correct
recommendation.
a. While both projects' IRRs are above their respective IRR thresholds, the NPV of project B is materially higher than
the NPV of project A, so project B is recommended.
b. Since the NPV and the IRR of project A are both higher than the NPV and the IRR of project B, project A is
recommended.
C. While both projects' IRRs are above their respective IRR thresholds, the NPV of project A is materially higher than
the NPV of project B, so project A is recommended.
d. Since the NPV and the IRR of project B are both higher than the NPV and the IRR of project A, project B is
recommended.
Your company is considering two mutually exclusive projects, A and B,

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