A firm with a WACC of 10% is considering the following mutually exclusive projects:

0

1

2

3

4

5

Project 1	-$200	$45	$45	$45	$190	$190
Project 2	-$600	$200	$200	$130	$130	$130

Which project would you recommend?

Select the correct answer.

a. Project 2, since the NPV2 > NPV1.

b. Both Projects 1 and 2, since both projects have NPV's > 0.

c. Both Projects 1 and 2, since both projects have IRR's > 0.

d. Neither Project 1 nor 2, since each project's NPV < 0.

e. Project 1, since the NPV1 > NPV2.