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 true?
Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, which of the following statements is true?
| Year | Project A | Project B |
| 0 | -580,000 | -580,000 |
| 1 | 290,000 | 130,000 |
| 2 | 290,000 | 130,000 |
| 3 | 150,000 | 230,000 |
| 4 | 150,000 | 230,000 |
| 5 |
| 230,000 |
| 6 |
| 115,000 |
Group of answer choices
Project B should be accepted because it has the highest EAA.
Project B should be accepted because it has the highest NPV.
Both projects should be accepted because both have a positive NPV (and EAA).
Project A should be accepted because it has the highest EAA.
Project A should be accepted because it has the highest NPV.
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Financial Accounting and Reporting a Global Perspective
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
4th edition
978-1408066621, 1408066629, 1408076861, 978-1408076866
