Question
A firm must choose between two mutually exclusive projects, A & B. Project A has an initial cost of $11000. Its projected net cash flows
A firm must choose between two mutually exclusive projects, A & B. Project A has an initial cost of $11000. Its projected net cash flows are $900, $2000, $3000, $4000, and $5000 at the end of years 1 through 5, respectively. Project B has an initial cost of $15000, and its projected net cash flows are $7000, $5000, $3000, $2000, and $1000 at the end of years 1 through 5, respectively. If the firms cost of capital is 6.00%:
A. Project B should be chosen because it has the higher IRR
B. Project B should be chosen because it has the higher NPV
C. Project A should be chosen because it has the higher IRR
D. Project A should be chosen because it has the higher NPV
E. Both projects should be chosen because both have a positive NPV
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