Which mutually exclusive project would you select,if both are priced at $1,000 and your discount rate is 15 percent; Project A with three annual cash flows of $1,000,or Project B,with three years of zero cash flow followed by three years of $1,500 annually?
A) Project A
B) Project B
C) you are indifferent since the NPVs are equal
D) Neither project should be selected

Question

Quizplus · Accepted Answer

Project A has a higher NPV because it provides cash flows earlier, which are more valuable due to the time value of money at a 15% discount rate.

Which Mutually Exclusive Project Would You Select,if Both Are Priced