Question: Compare the two mutually exclusive projects shown below:
|
Time
|
Project A
|
Project B
|
|
0
|
-725
|
-850
|
|
1
|
100
|
200
|
|
2
|
250
|
200
|
|
3
|
250
|
200
|
|
4
|
200
|
200
|
|
5
|
100
|
200
|
|
6
|
100
|
200
|
|
7
|
100
|
200
|
a. What discount rate would lead to the same NPV for both projects?
b. If the appropriate cost of capital is 10%, which project should be accepted?