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    Which project should be accepted?

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    Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:

    The required rate of return on these projects is 11 percent.

    0 -$100,000 -$100,000
    1 32,000 0
    2 32,000 0
    3 32,000 0
    4 32,000 0
    5 32,000 $200,000

    please answer:Which project should be accepted? Why? Please answer in paragraph form!

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    Solution Preview

    Summary: Project A provides a steady cash flow which affects the interest in a positive manner making the annual interest amount larger than that of Project B (assuming a simple interest of 11% paid at the end of the year on the available balance) until the end of year 5.

    At the end of the first year Project A has a total of $146520 while Project B has a balance of $111000. At ...

    Solution Summary

    Which project should be accepted is determined.