Consider the Following Projects, X and Y, Where the Firm

Multiple Choice

Consider the following projects, X and Y, where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 10 percent?

A) Project X, since it has a higher NPV than Project Y
B) Project Y, since it has a higher NPV than Project X
C) Project X, since it has a lower NPV than Project Y
D) Project Y, since it has a lower NPV than Project X