Question: Your firm is considering two mutually exclusive projects with the cash flows shown below. The required rate of return on both projects is 8 percent.
Your firm is considering two mutually exclusive projects with the cash flows shown below. The required rate of return on both projects is 8 percent. The maximum allowable payback and discounted payback periods for both projects are 2 and 3 years, respectively. Use the NPV decision rule to evaluate these projects. Which projects should be accepted/rejected? Time 0 1 2 3 -20,000 10,000 30,000 1,000 Project A Cash Flow Project B Cash Flow -30,000 10,000 20,000 50,000
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