Capital budgeting criteria: mutually exclusive projects

Project S costs $12,000 and its expected cash flows would be $4,500 per year for 5 years. Mutually exclusive Project L costs $35,000 and its expected cash flows would be $8,100 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend?

Select the correct answer.

I. Project S, since the NPVS> NPVL.

II. Both Projects S and L, since both projects have NPV's > 0.

III. Both Projects S and L, since both projects have IRR's > 0.

IV. Neither S or L, since each project's NPV < 0.

V. Project L, since the NPVL> NPVS.