A Firm Can Invest in One of Two Projects: the Purchase

question 5

Multiple Choice

A firm can invest in one of two projects: the purchase of new manufacturing equipment or the training of its factory workers in the better use of time management. Both projects cost the same amount of money. The purchase of new manufacturing equipment is expected to reduce costs by $10,000 each year for 5 years. The training of the factory workers in the better use of time management is expected to increase revenues by $10,000 each year for 10 years. Which of the following is true?

• A) Each of these projects would have the same expected rate of return, as they both cost the same.
• B) The purchase of new manufacturing equipment would have the higher expected rate of return, as it increases revenues whereas the training of factory workers in the better use of time management only reduces costs.
• C) The training of factory workers would have the higher expected rate of return, as it will reduce costs for a longer time period than the purchase of new manufacturing equipment will increase revenues.
• D) The expected rates of return for these two projects cannot be compared, as one project reduces costs and the other increases revenues.

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Definitions:

Free of Infection

A state in which an individual or environment has no presence of harmful microorganisms.

Caloric Intake

The total number of calories consumed through food and drink in a given period, critical for maintaining body weight and energy balance.

Slough

Dead tissue that is shed or removed from the surface of the skin, especially in a wound healing process, presenting as a feature of some infections or conditions.

Hydrocolloid Dressing

A type of bandage made from gel-forming agents that provide a moist and insulated healing environment, often used for wounds.