You are considering two independent projects.The required rate of return is 13.75 percent for Project A and 14.25 percent for Project B.Project A has an initial cost of $51,400 and cash inflows of $21,400,$24,900,and $22,200 for Years 1 to 3,respectively.Project B has an initial cost of $38,300 and cash inflows of $23,000 a year for 2 years.Which project(s),if either,should you accept?
A)Accept both A and B
B)Reject both A and B
C)Accept A and reject B
D)Accept B and reject A
E)Accept either A or B but not both A and B

Question

Quizplus · Accepted Answer

NPV_A= -$51,400 + $21,400 / 1.1375 + $24,900 / 1.1375² + $22,200 / 1.1375³ = $1,740.62; Accept NPV_B = -$38,300 + $23,000 / 1.1425 + $23,000 / 1.1425² = -$548.32; Reject

You Are Considering Two Independent Projects