Capital budgeting criteria: mutually exclusive projects
Project S costs $16,000 and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L costs $50,000 and its expected cash flows would be $7,800 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend?
I. Both Projects S and L, since both projects have NPV's > 0
II. Project S, since the NPVS > NPVL.
III. Neither S or L, since each project's NPV < 0.
IV. Project L, since the NPVL > NPVS.
V. Both Projects S and L, since both projects have IRR's > 0.