Consider the following two mutually exclusive projects: Year Cash Flow Cash Flow B 0 -$318,844 -$27,476 1 27,700 9,057 2 56,000 10,536 3 55,000 11,849 4 399,000 13,814 The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct? A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.B. The profitability rule implies accepting Project A.C. The IRR decision rule should be used as the basis for selecting the project in this situation.D. Only NPV implies accepting Project A.E. NPV, IRR, and PI all imply accepting Project A.
Consider the following two mutually exclusive projects:
Year Cash Flow Cash Flow B
0 -$318,844 -$27,476
1 27,700 9,057
2 56,000 10,536
3 55,000 11,849
4 399,000 13,814
The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct?
A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.
B. The profitability rule implies accepting Project A.
C. The IRR decision rule should be used as the basis for selecting the project in this situation.
D. Only NPV implies accepting Project A.
E. NPV, IRR, and PI all imply accepting Project A.
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