We have two mutually exclusive projects A and B. Both require initial costs of $10,000 and last for 4 years. Project A has expected future cash flows of $4,000, $5,000, $8,000 and $3,000, respectively. Project B has expected future cash flows of $8,000, $9,000, $2,000 and -$3,000. If the required return for project A is 20% and the required return for project B is 9%, which project should we start? O Have no idea O Start both projects because both of them have positive NPVs O B. Because its npv 4333.66 is higher than the NPV of A, which is 2881.94. O A. Because its NPV is $5158.19 which is higher than the NPV of project B, which is $4333.66

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 2PA: Jasmine Manufacturing is considering a project that will require an initial investment of $52,000...
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We have two mutually exclusive projects A and B. Both require initial costs of $10,000 and
last for 4 years. Project A has expected future cash flows of $4,000, $5,000, $8,000 and
$3,000, respectively. Project B has expected future cash flows of $8,000, $9,000, $2,000 and
-$3,000. If the required return for project A is 20% and the required return for project B is 9%,
which project should we start?
O Have no idea
O Start both projects because both of them have positive NPVs
O B. Because its npv 4333.66 is higher than the NPV of A, which is 2881.94.
O A. Because its NPV is $5158.19 which is higher than the NPV of project B, which is $4333.66
Transcribed Image Text:We have two mutually exclusive projects A and B. Both require initial costs of $10,000 and last for 4 years. Project A has expected future cash flows of $4,000, $5,000, $8,000 and $3,000, respectively. Project B has expected future cash flows of $8,000, $9,000, $2,000 and -$3,000. If the required return for project A is 20% and the required return for project B is 9%, which project should we start? O Have no idea O Start both projects because both of them have positive NPVs O B. Because its npv 4333.66 is higher than the NPV of A, which is 2881.94. O A. Because its NPV is $5158.19 which is higher than the NPV of project B, which is $4333.66
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