Question
Use the following for Questions 1 - 4: You are considering two mutually exclusive projects, A and B. Project A costs $70,000 and generates cash
Use the following for Questions 1 - 4:
You are considering two mutually exclusive projects, A and B.
Project A costs $70,000 and generates cash flows of $12,000 for 10 years.
Project B costs $60,000 and generates cash flows of $2,000 for six years and then cash flows of $29,000 for four years.
Report rates in percentage form to two decimal places i.e. 10.03% not 10%
Question 1
At what discount rate would make you indifferent between choosing one project or another?
Question 2
Which project would you ACCEPT if your discount rate was 10%?
A) Project A
B) Project B
C) Both Project A and B
D) Neither Project A or B
Question 3
Which project would you ACCEPT if your discount rate was 5%?
A) Project A
B) Project B
C) Both Project A and B
D) Neither Project A or B
Question 4
What is the highest discount rate in which you can still produce a non-negative NPV?
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