Homework answers / question archive / Projects A and B are mutually exclusive, Project A has a cost of $1,000 and provides a $550 cash inflow in each of the next two years

Projects A and B are mutually exclusive, Project A has a cost of $1,000 and provides a $550 cash inflow in each of the next two years

Finance

Share With

Projects A and B are mutually exclusive, Project A has a cost of $1,000 and provides a $550 cash inflow in each of the next two years. Project B costs $1,000 and generates cash inflows of $250 and $850 in year 1 and 2, respectively. Which investment should the firm choose if the cost of capital is 10%?

answer choices

Project B, since it has a higher NPV than Project A.

Project A, since it has a higher NPV than Project B.

Both, since both projects have positive NPV.

Neither, since both projects have negative NPV.