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Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time: 0 1 2 3 Project A Cash Flow -39,000 29,000 49,000 20,000 Project B Cash Flow -49,000 29,000 39,000 69,000 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected? rev: 12_04_2012 accept both A and B accept A, reject B reject A, accept B accept neither A nor B

Financial Management, Finance

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