Consider the following two mutually exclusive projects:
| Year |
Cash Flow A |
Cash Flow B |
| 0 |
($317,000) |
($26,500) |
| 1 |
27,700 |
9,057 |
| 2 |
56,000 |
10,536 |
| 3 |
55,000 |
11,849 |
| 4 |
$399,000 |
13,814 |
The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct?
A Because both the IRR and the PI imply accepting Project B, that project should be accepted.
B The profitability rule implies accepting Project A.
C The IRR decision rule should be used as the basis for selecting the project in this situation.
D Only NPV implies accepting Project A.
E NPV, IRR, and PI all imply accepting Project A.