Consider the following cash flows for Projects A and B, which are mutually exclusive:

Year	Project A	Project B
0	-$4,000,000	-$4,000,000
1	2,000,000	1,000,000
2	1,500,000	1,500,000
3	1,250,000	1,700,000
4	1,000,000	2,400,000

The cost of capital (used as the hurdle rate) for both projects is 10%. What is the net present value (NPV) of project A?

Select one:

A. $680,008.20

B. $506,748.15

C. $400,000.55

D. None of the above

You are the CFO of a small software firm that has to make a choice between two mutually exclusive capital investment projects. Your firm earned an average return of 28% on its projects last year, while its cost of capital was 12%. Would you expect NPV or IRR to be the better investment decision rule for your firm?

Select one:

A. NPV, because it is more intuitive than IRR.

B. IRR, because it clears the hurdle rate more easily than NPV.

C. NPV, because it uses a more realistic reinvestment rate assumption than IRR.

D. IRR, because it is a better indicator of value creation than NPV.