Question

You have two projects to consider. Both have 4-years of cash flows and a 4% discount...

You have two projects to consider. Both have 4-years of cash flows and a 4% discount rate is appropriate for both projects. The cash flows for project X have a present value of $362.99.

Present Value @ 4%

End of Year 1

End of Year 2

End of Year 3

End of Year 4

Project X

362.99

100

100

100

100

Project Y

-100

-100

-100

-100

Which of the following is correct?

  1. You would accept project X if the initial outlay is less than $362.99.
  2. You would accept project Y if you are paid more than $362.99 at Year 0.
  3. Both (a) and (b) are true.
  4. Neither (a) nor (b) is true.
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