Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, which of the following statements is true? Year 0 235533 Project A -580,000 290,000 290,000 150,000 150,000 Project B -580,000 130,000 130,000 230,000 230,000 230,000 115,000 Project A should be accepted because it has the highest NPV. Both projects should be accepted because both have a positive NPV (and EAA). Project A should be accepted because it has the highest EAA. Project B should be accepted because it has the highest NPV. Project B should be accepted because it has the highest EAA.

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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Given the following cash flows for two mutually exclusive projects, and a required rate of return of
12%, which of the following statements is true?
Year
2335~TO
OO
Project A
-580,000
290,000
290,000
150,000
150,000
Project B
-580,000
130,000
130,000
230,000
230,000
230,000
115,000
Project A should be accepted because it has the highest NPV.
Both projects should be accepted because both have a positive NPV (and EAA).
Project A should be accepted because it has the highest EAA.
Project B should be accepted because it has the highest NPV.
Project B should be accepted because it has the highest EAA.
Transcribed Image Text:Given the following cash flows for two mutually exclusive projects, and a required rate of return of 12%, which of the following statements is true? Year 2335~TO OO Project A -580,000 290,000 290,000 150,000 150,000 Project B -580,000 130,000 130,000 230,000 230,000 230,000 115,000 Project A should be accepted because it has the highest NPV. Both projects should be accepted because both have a positive NPV (and EAA). Project A should be accepted because it has the highest EAA. Project B should be accepted because it has the highest NPV. Project B should be accepted because it has the highest EAA.
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