1. Which mutually exclusive project would you select, if Project A costs $1,000 and Project B costs $1,200 and your required return is 15% for both project: Project A with three annual cash flows of $900; or Project B with 3 three annual cash flows of $1,000?
A. Project A B. Project B C. You are indifferent since the NPVs are equal D. Neither project should be selected.
2. What is the minimum cash flow that could be received at the end of year 3 to make the following project "acceptable"? Initial cost = $100,000; cash flows at end of years 1 and 2 = $45,000; opportunity cost of capital = 15%.
A. $29,455 B. $41,250 C. $40,825 D. $53,437