Your firm is considering two mutually exclusive projects-10916
Your firm is considering two mutually exclusive projects, code-named A and B, that would each require an initial cash outflow of $10,000. They would generate the following incremental, after-tax, operating cash flows: <table border='1' cellpadding='1' cellspacing='1' style='width:100%'><tbody><tr><td></td><td>Project A</td><td>Project B</td></tr><tr><td>Year 1</td><td>$5,000</td><td>$3,000</td></tr><tr><td>Year 2</td><td>4,000</td><td>4,000</td></tr><tr><td>Year 3</td><td>3,000</td><td>6,000</td></tr></tbody></table><br>If the firms required rate of return is 14 percent, which would you select?
This multiple choice question (MCQ) is related to the book/course
vu fin622 Corporate Finance.
It can also be found in
vu fin622 Final Term - Quiz No.4.
Your firm is considering two mutually exclusive projects, code-named A and B, that would each require an initial cash outflow of $10,000. They would generate the following incremental, after-tax, operating cash flows:
If the firms required rate of return is 14 percent, which would you select?
| Project A | Project B | |
| Year 1 | $5,000 | $3,000 |
| Year 2 | 4,000 | 4,000 |
| Year 3 | 3,000 | 6,000 |
If the firms required rate of return is 14 percent, which would you select?
Neither project because neither adds value to the firm.
Project A because it has the higher net present value.
Project B because it has the higher internal rate of return.
Project A because it has the shorter payback period.
