A firm has the following investment alternatives.

A firm has the following investment alternatives.

Year Project A Project B

Cash Flow Cash Flow

0 -$100,000 -$100,000

1 50,000 10,000

2 40,000 30,000

3 30,000 40,000

4 10,000 60,000

The firm's cost of capital is 7%. Project A and project B are mutually exclusive. Which investment(s) should the firm make?

		Project A because it has the higher IRR
		Project A because it has the higher NPV
		Neither because both have IRRs less than the cost of capital
		Project B because it has the higher NPV
		Project B because it has the higher IRR