Projects A and B are mutually exclusive. Project A costs $10,000 and is expected to generate cash inflows of $4,000 for 4 years. Project B costs $10,000 and is expected to generate a single cash flow in year 4 of $20,000. The cost of capital is 12%. Which project would you accept and why?
A) Project B because it has the higher NPV.
B) Project B because it has the higher IRR.
C) Project A because it has the higher NPV.
D) Project A because it has the higher IRR.

Question

Quizplus · Accepted Answer

The Answer of Projects A and B are mutually exclusive. Project A costs $10,000 and is expected to generate cash inflows of $4,000 for 4 years. Project B costs $10,000 and is expected to generate a single cash flow in year 4 of $20,000. The cost of capital is 12%. Which project would you accept and why?
A) Project B because it has the higher NPV.
B) Project B because it has the higher IRR.
C) Project A because it has the higher NPV.
D) Project A because it has the higher IRR.

Projects a and B Are Mutually Exclusive