Tangshan Mining Company is considering investment in one of two mutually exclusive projects M and N which are described below. Tangshan Mining's overall cost of capital is 15 percent, the market return is 15 percent and the risk-free rate is 5 percent. Tangshan estimates that the beta for project M is 1.20 and the beta for project N is 1.40. tableau3 ( ( Project M Project NInitial Investment $700,000 $780,000 Year Cash Inflows (CF))( 1 $300,000 $220,000 2 300,000 320,000 3 300,000 380,000 4 300,000 460,000

Which project would be preferable if both projects were of average risk as the overall firm and Tangshan Mining has a beta of 1.0? (See Table 11.8)

		Project N because it has a higher NPV
		Project M because it has a higher IRR
		Project N because it has a higher IRR
		Project M because it has a higher NPV