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A firm with a WACC of 10% is considering the following mutually exclusive projects: 0 1 2 3 4 5 Year 0 1 2 3
A firm with a WACC of 10% is considering the following mutually exclusive projects: 0 1 2 3 4 5
Year 0 1 2 3 4 5
Project 1 -$450 $40 $40 $40 $180 $180
Project 2 -$400 $250 $250 $130 $130 $130
Which project would you recommend? Select the correct answer.
a. Project 1, since the NPV1 > NPV2.
b. Both Projects 1 and 2, since both projects have IRR's > 0.
c. Both Projects 1 and 2, since both projects have NPV's > 0.
d. Project 2, since the NPV2 > NPV1.
e. Neither Project 1 nor 2, since each project's NPV < 0. |
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