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A firm is considering two mutually exclusive projects that have the annual cash flows shown below. Projects A is a moderately risky project while Project
A firm is considering two mutually exclusive projects that have the annual cash flows shown below. Projects A is a moderately risky project while Project B is considered to have a high degree of risk. The firm's WACC is 7.34%. The firm uses the risk-adjusted discount rate method to account for project risk, Projects posing minimal risk are evaluated using WACC for the discount rate. Using the WACC as a base, 1.25% is added for moderately risky projects and 2.50% is added for significantly risky projects. The NPV of Project A is - $13.86 The NPV of Project B is - $32.18 Which project should be adopted
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