Based solely on the information below and assuming that the

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Reference no: EM13485081

Based solely on the information below, and assuming that the projects are mutually exclusive, if the firm's cost of capital is 14% it will:

a. accept both projects
b. select project 1 because it has a shorter payback period
c. select project 2 because it has a higher IRR
d. select project 1 because it has a higher IRR
e. reject both projects.

Information:

Two projects are under consideration. An analysis of cash flows reveals the following data.

Project 1:
year 0 = (10,000)
year 1 = 0
year 2 = 0
year 3 = 0
year 4 = 18,100

Project 2:
year 0 = (10,000)
year 1 = 3,900
year 2 = 3,900
year 3 = 3,900
year 4 = 3.900

Reference no: EM13485081

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