Projects S and L Are Both Normal Projects with an Initial

question 68

Multiple Choice

Projects S and L are both normal projects with an initial cost of $10,000, followed by a series of positive cash inflows.Project S's undiscounted net cash flows total $20,000, while L's total undiscounted flows are $30,000.At a cost of capital of 10%, the two projects have identical NPVs.Which project's NPV is more sensitive to changes in the cost of capital?

• A) Project L.
• B) Both projects are equally sensitive to changes in the cost of capital since their NPVs are equal at all costs of capital.
• C) Neither project is sensitive to changes in the discount rate, since both have NPV profiles that are horizontal.
• D) The solution cannot be determined because the problem gives us no information that can be used to determine the projects' relative IRRs.
• E) Project S.

Differentiate between procurement and strategic sourcing and understand the strategic sourcing process.

Identify the advantages and disadvantages of e-procurement and e-sourcing.

Comprehend the steps involved in the Managing Strategic Sourcing Process.

Evaluate supplier selection criteria and understand the importance of financial health among other factors.

---

Definitions:

Unit Sales

The quantity of items sold by a company during a specific period, not accounting for returns or refunds.

Break-Even Sales

The amount of revenue required to cover both the variable and fixed costs of a business, resulting in neither profit nor loss.

Margin Of Safety

The difference between actual sales and sales at the break-even point, providing a cushion that measures the business's ability to withstand sales fluctuations.

Current Sales

The total revenue generated from goods or services sold by a company during the current period.