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You are evaluating the following two mutually exclusive projects:           Project           Year 0             Year 1           Year 2              A               -$100                 $95             $140               B                 -$50                 $50             $120 Both have 15% cost of capital.  Using NPV profiles for Projects A and B, determine which project would be chosen under each of IRR rule and NPV rule. (Hint: Draw the NPV profiles.) Group of answer choices A under IRR rule, and B under NPV rule B under IRR rule, and A under NPV rule A under both IRR and NPV rules Cannot be determined. B under both IRR and NPV rules

You are evaluating the following two mutually exclusive projects:           Project           Year 0             Year 1           Year 2              A               -$100                 $95             $140               B                 -$50                 $50             $120 Both have 15% cost of capital.  Using NPV profiles for Projects A and B, determine which project would be chosen under each of IRR rule and NPV rule. (Hint: Draw the NPV profiles.) Group of answer choices A under IRR rule, and B under NPV rule B under IRR rule, and A under NPV rule A under both IRR and NPV rules Cannot be determined. B under both IRR and NPV rules

Essentials Of Investments
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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You are evaluating the following two mutually exclusive projects:

 

        Project           Year 0             Year 1           Year 2
             A               -$100                 $95             $140 
             B                 -$50                 $50             $120

Both have 15% cost of capital.  Using NPV profiles for Projects A and B, determine which project would be chosen under each of IRR rule and NPV rule. (Hint: Draw the NPV profiles.)

Group of answer choices

A under IRR rule, and B under NPV rule

B under IRR rule, and A under NPV rule

A under both IRR and NPV rules

Cannot be determined.

B under both IRR and NPV rules

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