You have been assigned the task of evaluating two mutually exclusive projects with the following project cash flows : If the appropriate discount rate on these project is 9 %which would be chosen and why ?

Year Project A Cash Flow Project B Cash Flow

0 -$100,000 -$100,000

1 40,000 0

2 40,000 0

3 40,000 0

4 40,000 0

5 40,000 210,000

What is the NPV of project A?

What is the NPV of project B?

Which project would be chosen and why?

a) Choose B because its NPV is higher

b) Cannot choose without comparing their IRRs

c) Choose both because the have positive NPVs

d) Choose A because its NPV is higher