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Crespi Inc. is trying to decide between two investment alternatives, A and B. Data for...

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Accounting

Crespi Inc. is trying to decide between two investment alternatives, A and B. Data for A and B are as follows:

Investment A Investment B
Cost of investment 120,000 40,000
Present value of net cash inflows 145,436 48,751
Net present value 25,436 8,751

Crespi can only invest in one of the two alternatives. Which of the following recommendations should Crespi follow?

A.Invest in A because it has the higher NPV.

B.Invest in A because it has a profitability index of 1.21, whereas B has a profitability index of 1.22.

C.Do not invest in either A or B because A has a profitability index of .21, and B has a profitability index of .22.

D.Invest in either A or B because each has a positive NPV.

E.Invest in B because it has a profitability index of 1.22, whereas A has a profitability index of 1.21.

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