Wilson's Market Is Considering Two Mutually Exclusive Projects That Will

Multiple Choice

Wilson's Market is considering two mutually exclusive projects that will not be repeated.The required rate of return is 13.9 percent for Project A and 12.5 percent for Project B.Project A has an initial cost of $54,500,and should produce cash inflows of $16,400,$28,900,and $31,700 for Years 1 to 3,respectively.Project B has an initial cost of $69,400,and should produce cash inflows of $0,$48,300,and $42,100,for Years 1 to 3,respectively.Which project,or projects,if either,should be accepted and why?

A) Project A; because its NPV is positive while Project B's NPV is negative
B) Project A; because it has the higher required rate of return
C) Project B; because it has the largest total cash inflow
D) Project B; because it has a negative NPV which indicates acceptance
E) Neither project; because neither has an NPV equal to or greater than its initial cost