Which of the following statements is correct? A)You should accept project A since its IRR 15%. B)You should reject project B since its NPV 0. C)Your should accept project A since its NPV

Question

Which of the following statements is correct? A)You should accept project A since its IRR > 15%. B)You should reject project B since its NPV > 0. C)Your should accept project A since its NPV < 0. D)You should accept project B since its IRR < 15%.

Quizplus · Accepted Answer

A)NPV_A = -100 + 40/(1.15)¹ + 50/(1.15)² + 60/(1.15)³ = 12.04 NPV_B = -73+ 30/(1.15)¹ + 30/(1.15)² + 30/(1.15)³ + 30/(1.15)⁴ = 12.65 IRR A CF₀ = -100 CF₁ = 40 CF₂ = 50 CF₃ = 60 Compute IRR = 21.64% IRR B CF₀ = -73 CF₁ = 30 CF₂ = 30 CF₃ = 30 CF₄ = 30 Compute IRR = 23.34%

Which of the Following Statements Is Correct