Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively. $$\begin{array} { | l | c | c | c | c | }
\hline \text { Time } & 0 & 1 & 2 & 3 \
\hline \text { Project A Cash Flow } & - 20,000 & 10,000 & 30,000 & 1,000 \
\text { Project B Cash Flow } & - 30,000 & 10,000 & 20,000 & 50,000 \
\hline
\end{array}$$
Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?
A)Accept both A and B
B)Accept neither A nor B
C)Accept A, reject B
D)Reject A, accept B

Question

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively. $$\begin{array} { | l | c | c | c | c | } 
\hline \text { Time } & 0 & 1 & 2 & 3  \
\hline \text { Project A Cash Flow } & - 20,000 & 10,000 & 30,000 & 1,000 \
\text { Project B Cash Flow } & - 30,000 & 10,000 & 20,000 & 50,000 \
\hline
\end{array}$$
Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? 
A)Accept both A and B
B)Accept neither A nor B
C)Accept A, reject B
D)Reject A, accept B

Quizplus · Accepted Answer

Project B has a higher NPV than Project A when discounted at 8%, making it the better choice.

Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects