11. Ace Inc. is evaluating two mutually exclusive projects Project A and Project B. The initial outflow is $50,000 for each project. Project A results in cash inflows of $17,525 at the end each of the next five years. Project B results in one cash inflow of $99,500 at the end of the year. The required rate of return of Ace Inc. is 10 percent. Ace Inc. should invest in: O a. Project B because it has no cash inflows in the first four years of its life. b. Project B because it has a positive net present value (NPV). O c. Project A because it will yield cash every year for five years. d. Project A because it has a positive net present value (NPV). e. Project A because it has a higher net present value(NPV) than B.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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11. Ace Inc. is evaluating two mutually exclusive projects-Project A and Project B. The initial cash
outflow is $50,000 for each project. Project A results in cash inflows of $17,525 at the end of
each of the next five years. Project B results in one cash inflow of $99,500 at the end of the fifth
year. The required rate of return of Ace Inc. is 10 percent. Ace Inc. should invest in:
a. Project B because it has no cash inflows in the first four years of its life.
b. Project B because it has a positive net present value (NPV).
c. Project A because it will yield cash every year for five years.
d. Project A because it has a positive net present value (NPV).
e. Project A because it has a higher net present value(NPV) than B.
Transcribed Image Text:11. Ace Inc. is evaluating two mutually exclusive projects-Project A and Project B. The initial cash outflow is $50,000 for each project. Project A results in cash inflows of $17,525 at the end of each of the next five years. Project B results in one cash inflow of $99,500 at the end of the fifth year. The required rate of return of Ace Inc. is 10 percent. Ace Inc. should invest in: a. Project B because it has no cash inflows in the first four years of its life. b. Project B because it has a positive net present value (NPV). c. Project A because it will yield cash every year for five years. d. Project A because it has a positive net present value (NPV). e. Project A because it has a higher net present value(NPV) than B.
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