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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 -$450 $45 $45

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

0 1 2 3 4 5
Project 1 -$450 $45 $45 $45 $165 $165
Project 2 -$550 $350 $350 $115 $115 $115

Which project would you recommend?

Select the correct answer.

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

b. Project 1, since the NPV1 > NPV2.

c. Project 2, since the NPV2 > NPV1.

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

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

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