Kim Lee Is Analyzing Two Projects

question 115

Multiple Choice

Kim Lee is analyzing two projects. The first requires a $1,200 initial investment and returns $600 a year for four years. The second project requires a $1,500 initial investment and returns $700 a year for four years. What is the crossover point for these two projects?

• A) 4.25%
• B) 6.37%
• C) 8.14%
• D) 12.59%
• E) The crossover point cannot be computed based on the information provided.

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Definitions:

Opportunity Cost

The expense incurred by not choosing the second-best option available when a decision is made.

Sweaters

Clothing items made of wool or similar yarns, designed to provide warmth by covering the upper body.

Hats

A type of headwear that comes in various shapes, sizes, and materials, often used for fashion, protection, or ceremonial purposes.

Production

The process of creating goods or services by combining various inputs like labor, capital, and natural resources.