Virus Stopper Inc. ,a supplier of computer safeguard systems,uses a required rate of return of 12 percent to evaluate average risk projects,and it adds or subtracts 2 percentage points to evaluate projects of more or less risk.Currently,two mutually exclusive projects are under consideration.Both have a cost of $200,000 and will last 4 years.Project A,a riskier-than-average project,will produce annual end of year cash flows of $71,104.Project B,of less than average risk,will produce cash flows of $146,411 at the end of Years 3 and 4 only.Virus Stopper should accept
A) B with a NPV of $10,001.
B) Both A and B because both have NPVs greater than zero.
C) B with a NPV of $8,042.
D) A with a NPV of $7,177.
E) A with a NPV of $15,968.
Correct Answer:
Verified
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