Question
Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, which of the following statements is correct?
Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, which of the following statements is correct?
| Year | Project A | Project B |
| 0 | -96,000 | -32,000 |
| 1 | 40,000 | 15,000 |
| 2 | 40,000 | 15,000 |
| 3 | 40,000 | 15,000 |
| 4 | 40,000 | 15,000 |
Because of size disparity, IRR indicates that Project B is better, but NPV indicates that Project A is better.
Because of time disparity, IRR indicates that Project A is better, but NPV indicates that Project B is better.
Because of size disparity, IRR indicates that Project A is better, but NPV indicates that Project B is better.
Because of time disparity, IRR indicates that Project B is better, but NPV indicates that Project A is better.
Time/size disparity is not a concern in this scenario.
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Financial Accounting The Impact On Decision Makers
Authors: Gary A Porter, Curtis L Norton
7th Edition
1439080526, 9781439080528
