Problem: You are evaluating two mutually exclusive capital budgeting projects that have the following characteristics:
CASH FLOWS
YEAR PROJECT A PROJECT B
0 ($4,000) ($4,000)
1 0 3,500
2 $5,000 1,100
IRR 11.8% 12.0%
If your required rate of return (k) is 10percent, which project should you choose, explain your answer?
A. Both
B. Neither
C. Project A
D. Project B
E. None of the above