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 Dec 03, 2020

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.

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The answers to the given question are provided in the order below

Neither, since both projects have negative NPV

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