a-firm-is-evaluating-two-projects-project-a-with-a-7-return-and-project-b-with-a

Question

A firm is evaluating two projects: Project A with a 7% return and Project B with a 4% return. If the interest rate is 5%, which project should the firm choose?

Accepted Answer

Project A, because its return exceeds the interest rate.

Answer

Project B, because it has a lower return.

Answer

Neither, because both returns are below the interest rate.

Answer

Both, because they both have positive returns.