6.Consider the following mutually exclusive projects. Which of the following is true? Assume WACC is 12%.

	Project A	Project B
Year	Cash Flow	Cash Flow
0	-$3,000	-$3,000
1	$0	$2,000
2	$1,200	$1,000
3	$3,500	$1,000

Project A has higher NPV, and Project A has higher IRR.

Project B has higher NPV, but Project A has higher IRR.

Project B has higher NPV, and Project B has higher IRR.

Project A has higher NPV, but Project B has higher IRR.

7.Consider the following project cash flows. Your company's WACC is 20%. What is the discounted payback period of the project, in years? (Assume cash flows are earned evenly and continuously throughout each year.)

Year	Cash Flow
0	-$5,000
1	$1,500
2	$2,000
3	$2,500
4	$4,000

2.53

2.60

3.00

3.90

3.47

8.Your company plans to spend $500,000 to develop a prototype. The prototype will succeed with 80% probability. If the prototype fails, the project ends without any additional cashflows. If the prototype succeeds, it will generate annual cashflows for 3 years depending on the demand for the product. Demand will either be strong or weak, with equal probability. If demand is strong, the firm will generate free cash flows of $750,000 for 3 years. If demand is weak, the firm will generate free cash flows of $300,000 instead. The WACC is 14%. What is closest to the expected NPV for this project?

$719,000

$475,000

$313,000

$625,000

$741,000