Consider the following two mutually exclusive projects: Year   Cash Flow  Cash Flow B 0          -$318,844        -$27,476 1          27,700             9,057 2          56,000             10,536 3          55,000             11,849 4          399,000           13,814 The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct? A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.B. The profitability rule implies accepting Project A.C. The IRR decision rule should be used as the basis for selecting the project in this situation.D. Only NPV implies accepting Project A.E. NPV, IRR, and PI all imply accepting Project A.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Consider the following two mutually exclusive projects:

Year   Cash Flow  Cash Flow B

0          -$318,844        -$27,476

1          27,700             9,057

2          56,000             10,536

3          55,000             11,849

4          399,000           13,814


The required return is 15 percent for both projects. Which one of the following statements related to these projects is correct?


A. Because both the IRR and the PI imply accepting Project B, that project should be accepted.
B. The profitability rule implies accepting Project A.
C. The IRR decision rule should be used as the basis for selecting the project in this situation.
D. Only NPV implies accepting Project A.
E. NPV, IRR, and PI all imply accepting Project A.

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