10. Problem 11.11 (Capital Budgeting Criteria:
Mutually Exclusive Projects)
eBook
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 NPV_{S} >
NPV_{L}. 



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 NPV_{L} >
NPV_{S}. 



e. Both Projects S and L, since both projects have IRR's >
0. 

