Question
Wayward Travel is considering two mutually exclusive projects that will not be repeated. The required rate of return is 13.9 percent for Project A and
Wayward Travel is considering two mutually exclusive projects that will not be repeated. The required rate of return is 13.9 percent for Project A and 12.5 percent for Project B. Project A has an initial cost of $58,500, and should produce cash inflows of $16,400, $28,900, and $31,700 for Years 1 to 3, respectively. Project B has an initial cost of $69,400, and should produce cash inflows of $0, $48,300, and $42,100, for Years 1 to 3, respectively. Which project, or projects, if either, should be accepted and why?
Group of answer choices
Project A; because it has the higher required rate of return
neither project; because neither has an NPV equal to or greater than its initial cost
None of these is correct
Project A; because its NPV is higher than Project B's NPV
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