NPV

Capital budgeting criteria: mutually exclusive projects

A firm with a WACC of 10% is considering the following mutually exclusive projects:

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1

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3

4

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Project A	-$250	$60	$60	$60	$235	$235
Project B	-$400	$350	$350	$80	$80	$80

Which project would you recommend?

Select the correct answer.

I. Project A, since the NPVA > NPVB.

II. Neither A or B, since each project's NPV < 0.

III. Project B, since the NPVB > NPVA.

IV. Both Projects A and B, since both projects have IRR's > 0.

V. Both Projects A and B, since both projects have NPV's > 0.