Using the net present value method, the total present value of cash inflows for Project A is $30,000 and the total present value of cash inflows of Project B is $36,000. If Project A and Project B both require an initial investment of $30,000 and have the same economic life, the project that should be accepted is
A) Project A.
B) Project B.
C) neither; they are both the same.
D) not capable of being calculated.

Question

Quizplus · Accepted Answer

Project B has a higher present value of cash inflows than Project A, even though both require the same initial investment and have the same economic life. Therefore, Project B is the better choice.

Using the Net Present Value Method, the Total Present Value