Question

Benton Exploration Company is considering two mutually exclusive projects. Project A has a cost of $10,000 and is expected to generate net cash flows of $4,000 per year for 5 years. Project B has a cost of $25,000 and is expected to generate net cash flows of $9,000 per years for 5 years. Benton's cost of capital is 15 percent.

Based on the net present value (NPV) method, which project should be undertaken?

Group of answer choices

Project A

Project B

Neither

Answer #1

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Project S costs $11,000 and its expected cash flows would be
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Select the correct answer.
I. Neither S or L, since each
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II. Project L, since the NPVL >
NPVS.
III. Project...

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projects that have the following cash flows:
Project
A
Project B
Year
Cash
Flow
Cash Flow
0
-$11,000
-$9,000
1
1,500
6,000
2
3,000
4,000
3
5,000
3,000
4
9,000
2,000
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