Ilona Is Considering Two Projects Both of Which Have an Initial

question 295

Multiple Choice

Ilona is considering two projects both of which have an initial cost of $17,000 and total cash inflows of $21,000. The cash inflows of project A are $6,000, $5,000, $5,000, and $5,000 over the next four years, respectively. The cash inflows for project B are $9,000, $7,000, $3,000 and $2,000 over the next four years, respectively. Which one of the following statements is correct if Ilona requires a 12 % rate of return and has a required discounted payback period of 3.5 years?

• A) Both projects should be accepted.
• B) Neither project ever pays back.
• C) Project A should be accepted and Project B should be rejected.
• D) Project A should be rejected and Project B should be accepted.
• E) Both projects should be rejected even though Project B does pay back.

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Definitions:

Stages in Development

Distinct phases through which individuals progress over their lifetime, typically encompassing physical, cognitive, and social/emotional development.

Informed Consent

A process by which individuals are fully briefed on the risks, benefits, and alternatives of a procedure or participation, allowing them to make educated decisions.

Monetary Compensation

Payment given to someone in exchange for their services or to compensate for loss or injury, typically in the form of money.

Receivables Turnover

A financial ratio that measures how effectively a company collects its accounts receivable, calculated by dividing total sales by average accounts receivable.