Question
18. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of
18. Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.
| Time: | 0 | 1 | 2 | 3 |
| Project A Cash Flow | -21,000 | 11,000 | 31,000 | 2,000 |
| Project B Cash Flow | -31,000 | 11,000 | 21,000 | 51,000 |
Use the NPV decision rule to evaluate these projects; which one(s) should it be accepted or rejected?
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The Finance Book
Authors: Stuart Warner, Si Hussain
1st Edition
1292123648, 978-1292123646
