You are considering two mutually exclusive projects with the following cash flows.Will your choice between the two projects differ if the required rate of return is 8% rather than 11%? If so, what should you do? $\begin{array}{cccl}
\underline{\text { Year } }&\underline{\text { Project A }}& & \underline{\text { Project B }} \
0 &-\$ 240,000 & & -\$ 198,900 \
1 &\$ 0 & & \$110,800 \
2 & \$ 0 & & \$ 82,500\
3 & \$ 325,000 & & \$ 45,000\

\end{array}$

A)yes; Select A at 8% and B at 11%.
B)yes; Select B at 8% and A at 11%.
C)yes; Select A at 8% and select neither at 11%.
D)no; Regardless of the required rate, project A always has the higher NPV.
E)no; Regardless of the required rate, project B always has the higher NPV.

Question

You are considering two mutually exclusive projects with the following cash flows.Will your choice between the two projects differ if the required rate of return is 8% rather than 11%? If so, what should you do? $\begin{array}{cccl}
\underline{\text { Year } }&\underline{\text { Project A }}& & \underline{\text { Project B }} \
0 &-\$ 240,000 & & -\$ 198,900 \
1 &\$ 0 & & \$110,800 \
2 &  \$ 0 & & \$ 82,500\
3 & \$ 325,000 & & \$ 45,000\

\end{array}$

A)yes; Select A at 8% and B at 11%.
B)yes; Select B at 8% and A at 11%.
C)yes; Select A at 8% and select neither at 11%.
D)no; Regardless of the required rate, project A always has the higher NPV.
E)no; Regardless of the required rate, project B always has the higher NPV.

Quizplus · Accepted Answer

The choice between the projects will differ. At an 8% discount rate, Project A has a higher NPV, while at an 11% discount rate, Project B has a higher NPV.

You Are Considering Two Mutually Exclusive Projects with the Following