Answer:
b) Project A because it has the larger NPV
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Project A
Cash flow in year 0 = $-52,000
Cash flow in year 1= $25,300,
Cash flow in year 2 = $37100
Cash flow in year 3= $22,000
I = 14.2
NPV = $13,372.95
Project B
Cash flow in year 0 = $-52,000
Cash flow in year 1= $43,600
Cash flow in year 2 =, $19,800
Cash flow in year 3= $10,400
I = 13.9
NPV = $8,579.62
The NPV of project A is larger than that of project B, so, project A is more suitable
