An investor is considering the two investments shown above. Which of the following statements about these investments is true?

Time: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Discount
Rate
Investment A: -$1.5 million $300,000 $300,000 $300,000 $500,000 $500,000 8%
Investment B: -$1.3 million $500,000 $400,000 $300,000 $200,000 $100,000 7%

A) The investor should take investment A since it has a greater net present value (NPV).
B) The investor should take investment A since it has a greater internal rate of return (IRR).
C) The investor should take investment B since it has a greater net present value (NPV).
D) Neither investment should be taken since they both have a negative net present value (NPV).

Answer: D