You are asked to evaluate the following two projects for Miami Hospital using a cost of capital of 10%:
Year Project A ($50,000 Investment) Project B ($60,000 Investment)
1 $15,625 $20,000
2 15,625 $15,000
3 15,625 $15,000
4 15,625 $10,000
5 15,625 $20,000
Which would you recommend and why?
Project B because of higher NPV.
Project B because of shorter payback.
Project A because of higher NPV.
Neither, because both have IRRs less than the required return.