(Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows: Year Project A Cash Flow Project B Cash Flow 0 $(100,000) $(100,000) 1 33,000 0 2 33,000 0 3 33,000 0 4 33,000 0 5 33,000 220,000 If the appropriate discount rate on these projects is 10 percent, which would be chosen and why? The NPV of Project A is $ (Round to the nearest cent.) The NPV of Project B is $ (Round to the nearest cent.) Which project would be chosen and why? (Select the best choice below.) A. Choose Upper B because its NPV is higher. B. Cannot choose without comparing their IRRs. C. Choose Upper A because its NPV is higher. D. Choose both because they both have positive NPVs.
(Mutually exclusive projects and NPV) You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows: Year Project A Cash Flow Project B Cash Flow 0 $(100,000) $(100,000) 1 33,000 0 2 33,000 0 3 33,000 0 4 33,000 0 5 33,000 220,000 If the appropriate discount rate on these projects is 10 percent, which would be chosen and why? The NPV of Project A is $ (Round to the nearest cent.) The NPV of Project B is $ (Round to the nearest cent.) Which project would be chosen and why? (Select the best choice below.) A. Choose Upper B because its NPV is higher. B. Cannot choose without comparing their IRRs. C. Choose Upper A because its NPV is higher. D. Choose both because they both have positive NPVs.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 13P
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(Mutually exclusive projects and NPV)
You have been assigned the task of evaluating two mutually exclusive projects with the following projected cash flows:
|
Year
|
Project A
Cash Flow
|
Project B
Cash Flow
|
|
|
0
|
$(100,000)
|
$(100,000)
|
|
|
1
|
33,000
|
0
|
|
|
2
|
33,000
|
0
|
|
|
3
|
33,000
|
0
|
|
|
4
|
33,000
|
0
|
|
|
5
|
33,000
|
220,000
|
If the appropriate discount rate on these projects is 10 percent, which would be chosen and why?
The NPV of Project A is $ (Round to the nearest cent.)
The NPV of Project B is $ (Round to the nearest cent.)
Which project would be chosen and why?
(Select the best choice below.)
Choose Upper B because its NPV is higher.
Cannot choose without comparing their IRRs.
Choose Upper A because its NPV is higher.
D.
Choose both because they both have positive NPVs.
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