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Please, provide the explanation Two mutually exclusive projects have the following cash flows, net present values, and internal rates of return: Initial t=0 Investment t=1
Please, provide the explanation
Two mutually exclusive projects have the following cash flows, net present values, and internal rates of return: Initial t=0 Investment t=1 Cash Flow t=2 Cash Flow NPV (r=15%) IRR Project A 56.5% - $10,000 - $5,000 $8,000 $7,000 $12,000 $5,000 $6,030 $4,868 Project B 92.1% If the appropriate cost of capital for each of these projects is 15% per year, compounded annually, which project should be undertaken and why? bi a. Project B since its total cash inflows are more than twice the cost of the project, while Project A's cash inflows are just twice the initial investment. Project B since its IRR is higher than Project A's IRR. c. Project B since its initial investment is returned in the first year and then can be invested in another project. d. Project A since it has an NPV that is greater than zero and is higher than Project B's
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