You are considering two independent projects that have a required return of 15 percent.Project A has an initial cost of $198,700 and cash inflows of $67,200,$109,600,and $88,700 for Years 1 to 3,respectively.Project B has an initial cost of $102,000 and cash inflows of $37,600 and $91,200 for Years 1 and 2,respectively.Given this information,which one of the following statements is correct based on the NPV and IRR methods of analysis?
A)You should accept both projects.
B)You should accept Project A and reject Project B.
C)You should accept Project B and reject Project A.
D)NPV indicates accept Project A while IRR indicates accepting Project B.
E)You should reject both projects.

Question

Quizplus · Accepted Answer

NPV_A = -$198,700 + $67,200 / 1.15 + $109,600 / 1.152 + $88,700 / 1.15³ NPV_A = $929.82; Accept $0 = -$198,700 + $67,200 / (1 + IRR)+ $109,600 / (1 + IRR)² + $88,700 / (1 + IRR)³ IRR = 15.27%; Accept NPV_B = -$102,000 + $37,600 / 1.15 + $91,200 / 1.15² = -$2,111.35 NPV_B = -$344.05; Reject $0 = -$102,000 + $37,600 / (1 + IRR)+ $91,200 / (1 + IRR)² IRR = 14.77%; Reject

You Are Considering Two Independent Projects That Have a Required