5 #5

5. Problem 11.11 (Capital Budgeting Criteria: Mutually Exclusive Projects) Project $ requires an intial outlay at t=0 of $18,000, and its expected cash flows would be $4,000 per year for 5 years. Mutually exclusive Project L requires an initis cutiay at t= 0 of $37,500, and its expected cash flows would be $14,950 per year for 5 years. If both projects have a Wacc of 12%, which project would you recommend? Select the correct answer. a. Both Projects 5 and L, since both projects have IRR's >0. b. Project L, since the NPV VL> NPV s. :. Both Projects S and Ls since both projects have NPV's >0, d. Neither Project S nor L, since each project's NPV NPVL. 5