Mutually exclusive projects

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Reference no: EM132041225

CAPITAL BUDGETING CRITERIA: MUTUALLY EXCLUSIVE PROJECTS

A firm with a WACC of 10% is considering the following mutually exclusive projects:

0 1 2 3 4 5

Project 1 - $500 $70 $70 $70 $160 $160

Project 2 - $600 $300 $300 $55 $55 $55

Which project would you recommend?

a. Both Projects 1 and 2, since both projects have NPV's > 0.

b. Project 1, since the NPV1 > NPV2.

c. Project 2, since the NPV2 > NPV1.

d. Neither Project 1 nor 2, since each project's NPV < 0.

e. Both Projects 1 and 2, since both projects have IRR's >0

Reference no: EM132041225

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