A Firm Is Considering Two Mutually Exclusive Projects with the Following

question 113

Multiple Choice

A firm is considering two mutually exclusive projects with the following cash flows: $$\begin{array} { l r r } & \text { Project X } & \text { Project Y } \\\text { Year 1 } & \$ 40,000 & \$ 120,000 \\\text { Year 2 } & 80,000 & 80,000 \\\text { Year 3 } & 120,000 & 40,000\end{array}$$ Each project requires an investment of $100,000. The cost of capital is 10 percent. Which project will have the higher net present value?

• A)Project X
• B)Project Y
• C)Project X and Project Y will have the same net present value.
• D)It is not possible to answer the question based upon the information provided.

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Definitions:

Glycogen

A multibranched polysaccharide of glucose that serves as a form of energy storage in animals and fungi.

Glucose

A simple sugar that is an important source of energy for cells and the primary form of sugar transported in the blood.

HCl

Hydrochloric acid, a strong acid formed by the solution of hydrogen chloride in water, which is a major component of gastric acid in the digestive system.

Digestion

Digestion is the process by which food is broken down in the gastrointestinal tract into nutrients that can be absorbed and utilized by the body.