Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Which of the following statements is true concerning projects A and B? Due to size disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted. Due to time disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Due to size disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Both NPV and IRR lead to the same investment decision. O Due to time disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted.
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Which of the following statements is true concerning projects A and B? Due to size disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted. Due to time disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Due to size disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Both NPV and IRR lead to the same investment decision. O Due to time disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted.
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 14P
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