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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 -$300 $50 $50
A firm with a WACC of 10% is considering the following mutually exclusive projects:
0 | 1 | 2 | 3 | 4 | 5 |
Project 1 | -$300 | $50 | $50 | $50 | $210 | $210 |
Project 2 | -$450 | $350 | $350 | $150 | $150 | $150 |
Which project would you recommend?
a. Neither Project 1 nor 2, since each project's NPV < 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 NPV's > 0.
e. Both Projects 1 and 2, since both projects have IRR's > 0.
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