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A firm with a WACC of 10% is considering the following mutually exclusive projects: 0 1 2 3 4 5 Project 1 -$500 $70 $70

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

0 1 2 3 4 5
Project 1 -$500 $70 $70 $70 $185 $185
Project 2 -$600 $250 $250 $145 $145 $145

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. Neither Project 1 nor 2, since each project's NPV < 0.
d. Both Projects 1 and 2, since both projects have IRR's > 0.
e. Project 1, since the NPV1 > NPV2.

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