2. Project S costs $10,000 and its expected cash flows would be $5,500 per year for 5 years. Mutually exclusive Project L costs $45,000 and its expected cash flows would be $10,250 per year for 5 years. If both projects have a WACC of 15%, which project would you recommend?

Select the correct answer.

a. Both Projects S and L, since both projects have NPV's > 0.

b. Both Projects S and L, since both projects have IRR's > 0.

c. Project L, since the NPVL > NPVS.

d. Neither Project S nor L, since each project's NPV < 0.

e. Project S, since the NPVS > NPVL.

3. A project has annual cash flows of $3,500 for the next 10 years and then $7,500 each year for the following 10 years. The IRR of this 20-year project is 13.67%. If the firm's WACC is 11%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.