Your company is considering two mutually exclusive projects, A and $B,$ whose costs and cash flows are shown below. Project

$A$ is of average risk while project $B$ is of higher risk. Projects of average risk are analyzed using the WACC as below

indicated. Projects of higher risk are analyzed using a $3\%$ risk premium above the WACC. Choose the correct

recommendation.

a$.$ While both projects' IRRs are above their respective IRR thresholds, the NPV of project B is materially higher than

the NPV of project $A,$ so project $B$ is recommended.

b$.$ Since the NPV and the IRR of project A are both higher than the NPV and the IRR of project B$,$ project $A$ is

recommended.

C$.$ While both projects' IRRs are above their respective IRR thresholds, the NPV of project A is materially higher than

the NPV of project $B,$ so project $A$ is recommended.

d$.$ Since the NPV and the IRR of project B are both higher than the NPV and the IRR of project $A,$ project $B$ is

recommended.