Merton Distillers Ltd

Multiple Choice

Merton Distillers Ltd. has a discount rate of 10% and two possible projects. Both projects allow reinvestment at the end of the term. The first is three years long and has a NPV of $1.3 million. The second is four years long and has a NPV of $1.4 million. Merton Distillers Ltd. should undertake

A) The second project because it has a NPV of $1.4
B) The first project because it has a positive NPV and allows for more rapid reinvestment
C) The second project because it has a higher NPV when calculated by the shortest-common-period-of time approach
D) The first project because its annualized equivalent is higher than that for the second project
E) Neither project because the results from the analytical methods provide conflicting conclusions