Choosing best alternatives

Reference no: EM1366723

Two Projects are being considered through a company are mutually exclusive and have the given projected cash flows:

Year Project A Cash Flow Project B Cash Flow
0 -$100,000 -$100,000
1 $39,500 0
2 $39,500 0
3 $39,500 $133,000

Based on the information given, which of the two projects would be preferred, and why?

A) Project A, because it has a shorter payback period
B) Project B, because it has a higher IRR
C) Indifferent, because both projects have equal IRR
D) Include both in the capital budget, since the sum of the cash flows exceeds the initial investment in both cases
E)Choose neither because their NPVs are negative.

Reference no: EM1366723

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