Mutually exclusive projects with given cash flows


Problem:

You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent?

Year Project A Project B

0 -$80,000 $80,000

1 32,000 0

2 32,000 0

3 32,000 105,000

A) accept project A as it always has the higher NPV

B) accept project B as it always has the higher NPV

C) accept A at 8.5 percent and B at 13 percent

D) accept B at 8.5 percent and neither at 13 percent.

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Finance Basics: Mutually exclusive projects with given cash flows
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