Answer Happy

Two mutually exclusive projects have an initial cost of $47,500
each. Project A produces cash inflows of $43,600, $19,800 and
$10,400 for Years 1 through 3, respectively. Project B produces
cash inflows of $25,300, $37,100, and $22,000 for Years 1 through
3, respectively. The required rate of return is 14.7 percent for
Project A and 14.9 percent for Project B. Which project(s) should
be accepted and why?
Project B, because it has the largest cash inflow in Year 1.
Project B, because it has the higher required rate of
return.
Project B, because it has the larger NPV
Project A, because it has the larger NPV.
Project A, because it has the higher required rate of
return.