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You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line...

You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value.

Year Project A Project B
0 -$87,000 -$85,000
1 31,000 15,000
2 37,000 20,000
3 44,000 90,000

Required rate of return for Project A is 9%, and required rate of return for Project B is 14%.

Should you accept or reject these projects based on net present value analysis?  
Answers:

accept Project A and reject Project B

reject Project A and accept Project B

accept both Projects A and B

You cannot make this decision based on internal rate of return analysis.
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