The Commodore Co

question 6

Multiple Choice

The Commodore Co. is trying to decide between the following two mutually exclusive projects: The only requirement the company has is that any project that is accepted must produce a minimum rate of return of 11%. What should the company do and why?

• A) Both projects should be accepted because their payback periods are only about 2 years.
• B) Both projects should be accepted because they have IRRs of 22.87% and 28.45%, which exceed the 11% requirement.
• C) Both projects should be accepted because they both have positive NPVs.
• D) Project I should be accepted because it has an NPV of $3,908.58. Project II cannot also be accepted.
• E) Project II should be accepted because it has an IRR of 28.45%, which is greater than Project I's IRR.

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Definitions:

Satisficing

A decision-making approach that seeks a satisfactory solution rather than an optimal one.

Decision-Critical Criteria

Essential factors or standards considered vital in making a decision.

Pros And Cons

The advantages and disadvantages or positive and negative aspects of a decision, action, or situation.

Dominance Structuring

The act of organizing or arranging elements, especially within social or organizational contexts, based on their level of control or influence.