You are considering two independent projects with the following cash flows. The required return for both projects is 10%. Given this information, which one of the following is correct?
Year Project A Project B
0 -$950,000 -$125,000
1 $330,000 $ 55,000
2 $400,000 $ 50,000
3 $450,000 $ 50,000
A. You should accept project B since it has the higher IRR and reject project A because you cannot accept both projects.
B. You should accept project A because it has the lower NPV and reject project B
C. You should accept project A because it has the higher NPV and you cannot accept both projects
D. You should accept project B because it has the higher IRR and reject project A.
E. You should accept both projects if the funds are available to do so since both NPV’s are >0.