Question
You are considering two projects. Project A has cash flows of $125,000, $51,400, $52,900, and $63,300 for Years 0 to 3, respectively. Project B has
You are considering two projects. Project A has cash flows of $125,000, $51,400, $52,900, and $63,300 for Years 0 to 3, respectively. Project B has cash flows of $85,000,$23,100, $28,200, and $69,800 for Years 0 to 3, respectively. Project A has a required return of 9% while Project B's required return is 11%. If your company only has enough capital to invest in one of these projects, which of the following statements is true?
A) Accept Project A because A's NPV is higher
B) Accept Project B because B's NPV is higher
C) Accept Project A because A's required return is lower
D) Accept Project B because B's required return is higher
E) Unable to decide with the information given.
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