Two projects each require a current cash expenditure of $10,000. Proje

Two projects each require a current cash expenditure of $10,000. Project A will generate cash inflows of $2,000 per year for the next twelve years. Project B is expected to return $6,000 in 1 year, $4,000 at the end of year 2, and $3,000 in 3 years.

Which project should be selected if funds are unavailable to finance both and capital costs are 6%?
A) Project B because it has a shorter payback period.
B) Project B because it has a higher IRR
C) Project A because it has a higher IRR
D) Project A because it has a higher NPV
E) Project B because it has a higher NPV

ANSWER

D