Capital budgeting criteria: mutually exclusive projects A firm with a WACC of 10% is considering the following mutually exclusive projects:
0 1 2 3 4 5
Project 1 -$500 $75 $75 $75 $200 $200
Project 2 -$500 $350 $350 $80 $80 $80
Which project would you recommend? Select the correct answer.
I. Both Projects 1 and 2, since both projects have IRR's > 0.
II. Project 1, since the NPV1 > NPV2.
III. Project 2, since the NPV2 > NPV1.
IV. Both Projects 1 and 2, since both projects have NPV's > 0.
V. Neither A or B, since each project's NPV < 0.