Question
You are considering two mutually exclusive projects. Both projects have an initial cost of $30,000. Project A produces cash inflows of $12,000, $12,500, and $15,000
You are considering two mutually exclusive projects. Both projects have an initial cost of $30,000. Project A produces cash inflows of $12,000, $12,500, and $15,000 for years 1 through 3, respectively. Project B produces cash inflows of $11,500, $13,000 and $16,000 for years 1 through 3, respectively. The required rate of return is 12.5 percent for Project A and 14.2 percent for Project B. Which project should you accept and why? Select one: A. Project B; because it has the largest cash inflow in year 3. B. Project B; because it has the higher required rate of return. C. Project A; because it has the larger NPV. D. Project A; because it has the lower required rate of return. E. Project B; because it has the larger NPV
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