Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects

question 53

Multiple Choice

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively.
$$\begin{array}{l}\begin{array} {| l | l | l | l | l | }\hline\text {Time: }&0&1&2&3\\\hline\text {Project A Cash flow:}&-20,000&10,000&30,000&1,000\\\hline\text {Project b Cash flow:}&-30,000&10,000&20,000&50,000\\\hline\end{array}\end{array}$$
Use the MIRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?

• A) Accept both A and B
• B) Accept neither A nor B
• C) Accept A, reject B
• D) Reject A, accept B

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Definitions:

Estimated Dose

A calculated approximation of the amount of a drug or substance required for a specific therapeutic effect in a patient, considering various factors.

Mcg

Microgram, a unit of mass equal to one millionth of a gram.

Ml

Milliliter, a unit of volume in the metric system, commonly used to measure liquids or fluid substances in medicine.

Drug Concentration

The amount of a drug within a given volume or weight of blood, serum, or other bodily fluids, critical for therapeutic effectiveness.