Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Which of the following statements is true concerning projects A and B? Due to size disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted. Due to time disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Due to size disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Both NPV and IRR lead to the same investment decision. O Due to time disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted.
Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of return is 16%. Use this information for the next 3 questions. Year Project A Cash Flow Project B Cash Flow ($50,000) ($20,000) 15,000 6,000 15,000 6,000 3 15,000 6,000 4 13,500 5,400 13,500 5,400 6,750 5,400 Which of the following statements is true concerning projects A and B? Due to size disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted. Due to time disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Due to size disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted. Both NPV and IRR lead to the same investment decision. O Due to time disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted.
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider the following cash flows for two mutually exclusive capital investment projects. The required rate of
return is 16%. Use this information for the next 3 questions.
Year
Project A Cash Flow
Project B Cash Flow
($50,000)
($20,000)
15,000
6,000
15,000
6,000
3
15,000
6,000
4
13,500
5,400
13,500
5,400
6,750
5,400
Transcribed Image Text:Which of the following statements is true concerning projects A and B?
Due to size disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted.
Due to time disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted.
Due to size disparity, IRR indicates that project B should be accepted and NPV indicates that project A should be accepted.
Both NPV and IRR lead to the same investment decision.
O Due to time disparity, IRR indicates that project A should be accepted and NPV indicates that project B should be accepted.
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