Two projects being considered are mutually exclusive and have the foll

Two projects being considered are mutually exclusive and have the following projected cash flows:

Year Project A Project B
0 -$50,000 -$50,000
1 $15,625 0
2 $15,625 0
3 $15,625 0
4 $15,625 0
5 $15,625 $99,500

If the required rate of return on these projects is 10%, which would be chosen and why?
A) B, because of higher NPV.
B) B, because of higher IRR.
C) A, because of higher NPV.
D) A, because of higher IRR.
E) Neither, because both have IRRs less than the cost of capital.

ANSWER

A