Anxin Fashion is considering two mutually exclusive projects that will not be repeated. The required...
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Anxin Fashion is considering two mutually exclusive projects that will not be repeated. The required rate of return is 13.9 percent for Project A and 12.5 percent for Project B. Project A has an initial cost of $54,500, and should produce cash inflows of $16,400, $28,900, and $31,700 for Years 1 to 3, respectively. Project B has an initial cost of $69,400, and should produce cash inflows of $0, $48,300, and $42,100, for Years 1 to 3, respectively. Which project, or projects, if either, should be accepted and why?
(a) Project A; because its NPV is positive while Project Bs NPV is negative
(b) Neither project; because neither has an NPV equal to or greater than its initial cost
(c) Project B; because it has the largest total cash inflow
(d) Project B; because it has a negative NPV which indicates acceptance
(e) Project A; because it has the higher required rate of return
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