Consider the following two mutually exclusive projects: Year   Cash Flow  Cash Flow B 0          -$318,844        -$27,476 1          27,700             9,057 2          56,000             10,536 3          55,000             11,849 4          399,000           13,814 The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct? A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.B. The profitability rule implies accepting Project A.C. The IRR decision rule should be used as the basis for selecting the project in this situation.D. Only NPV implies accepting Project A.E. NPV, IRR, and PI all imply accepting Project A.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter11: The Basics Of Capital Budgeting
Section: Chapter Questions
Problem 11P: CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS Project S requires an initial outlay at t =...
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Consider the following two mutually exclusive projects:

Year   Cash Flow  Cash Flow B

0          -$318,844        -$27,476

1          27,700             9,057

2          56,000             10,536

3          55,000             11,849

4          399,000           13,814


The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct?


A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.
B. The profitability rule implies accepting Project A.
C. The IRR decision rule should be used as the basis for selecting the project in this situation.
D. Only NPV implies accepting Project A.
E. NPV, IRR, and PI all imply accepting Project A.

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