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 ($110,000) ($110,000)
1 $30,000 $ 0
2 $30,000 $ 0
3 $30,000 $ 0
4 $30,000 $ 0
5 $30,000 $210,000
If the appropriate discount rate on these projects is 11 percent, which would be chosen and why? (Round to the nearest cent.)
a. The NPV of Project A is: $
b. The NPV of Project B is: $
Which project would be chosen and why? (Select the best choice below.)
a. Cannor choose without comparing their IRRs.
b. Choose A because its NPV is higher.
c. Choose both because they both have positive NPVs.
d. Choose B because its NPV is higher.