You are considering the following two mutually exclusive projects. The required rate of return is 14.6 per cent for project A and 13.8 per cent for project B. Which project should you accept and why?

Year. Project A. Project B

0. -50000. -50000

1. 24800. 41000

2. 36200. 20000

3. 21000. 10000

Multiple Choice

1. project B; because it has the largest total cash inflow

2. project A; because it has the higher required rate of return

3. project B; because it has the largest cash inflow in year one

4. project A; because its NPV is about 4,900 more than the NPV of project B

5. project B; because it has the lower required return