Question
Project R requires an initial outlay at t = 0 of $14,000, and its expected cash flows would be $6,000 per year for 5 years.
Project R requires an initial outlay at t = 0 of $14,000, and its expected cash flows would be $6,000 per year for 5 years. Mutually exclusive Project L requires an initial outlay at t = 0 of $32,500, and its expected cash flows would be $13,050 per year for 5 years. If both projects have a WACC of 14%, which project would you recommend?
Select the correct answer.
a. Neither Project S nor L, since each project's NPV < 0.
b. Project L, since the NPVL > NPVS.
c. Both Projects S and L, since both projects have NPV's > 0.
d. Project S, since the NPVS > NPVL.
e. Both Projects S and L, since both projects have IRR's > 0.
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