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ABC Corp. is considering the following mutually exclusive projects: Which of the following would represent the most optimal choice?
Correct Answer: A
Find NPV of each project: Note: NPV= (PV of CF)-( Cost)Project A: Given: PMT=45,000; N = 5 ; I = 10% -> Find: PV = 173,997 -> NPV = 173,997-150,000 = 23,997Project B: Given: PMT=162,912; N = 5; I = 13% -> Find: PV = 572,999 -> NPV = 572,999-570,000 = 2,999Since the projects are mutually exclusive, the optimal choice would be to choose the project with the higher NPV, Project A