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Year Project A (CF) Project B (CF) 0 -5000 -5000 1 +2000 +2500 2 +3000 +2000 3 +4000 +5000 The cost of capital is 10
Year Project A (CF) Project B (CF)
0 -5000 -5000
1 +2000 +2500
2 +3000 +2000
3 +4000 +5000
The cost of capital is 10 percent. Under the NPV method, which is the correct statement assuming A and B are mutually exclusive? (some rounding error is ok)
(a) Project A is preferable because the NPV is higher by $230.
(b) Project B is preferable because the NPV is higher by $380.
(c) Project A is preferable because the NPV is higher by $470.
(d) Project B is preferable because the NPV is higher by $500.
(e) Either A or B would be acceptable choices
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