You are considering two mutually exclusive projects, A and B.
Project A costs $65,000 and generates cash flows of $11,000 for 10 years.
Project B costs $100,000 and generates cash flows of $10,000 per year for five years and then a cash flow of $105,000 in year 6. There are no cash flows after year 6 for Project B.
Report rates in percentage form to two decimal places i.e. 10.03% not 10%
1) At what discount rate would make you indifferent between choosing one project or another?
2) Which project would you ACCEPT if your discount rate was 9%?
A. project A B. project B C.Both Project A and B D.Neither Project A or B
3) Which project would you ACCEPT if your discount rate was 5%?
A. project A B. project B C.Both Project A and B D.Neither Project A or B
4) What is the highest discount rate in which you can still produce a non-negative NPV?