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10.  Problem 11.11 (Capital Budgeting Criteria: Mutually Exclusive Projects) eBook Project S costs $18,000 and its expected...

10.  Problem 11.11 (Capital Budgeting Criteria: Mutually Exclusive Projects)

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Project S costs $18,000 and its expected cash flows would be $5,000 per year for 5 years. Mutually exclusive Project L costs $39,500 and its expected cash flows would be $7,900 per year for 5 years. If both projects have a WACC of 12%, which project would you recommend?

Select the correct answer.

a. Project S, since the NPVS > NPVL.
b. Both Projects S and L, since both projects have NPV's > 0.
c. Neither Project S nor L, since each project's NPV < 0.
d. Project L, since the NPVL > NPVS.
e. Both Projects S and L, since both projects have IRR's > 0.
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