Sexton Inc A)$13479
B)$141

question 85

Multiple Choice

Sexton Inc.is considering Projects S and L, whose cash flows are shown below.These projects are mutually exclusive, equally risky, and not repeatable.If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the project with the higher IRR will also have the higher NPV, so no value will be lost if the IRR method is used.
$$\begin{array} { | l | l | l | l | l | l | l | } \hline \text { WACC: } & 10.25 \% & & & & & \\\hline \text { Year } & & 0 & 1 & 2 & 3 & 4 \\\hline C _ { S } & & - \$ 2,050 & \$ 750 & \$ 760 & \$ 770 & \$ 780 \\\hline C F _ { L } & & - \$ 4,300 & \$ 1,500 & \$ 1,518 & \$ 1,536 & \$ 1,554 \\\hline\end{array}$$

• A)$134.79
• B)$141.89
• C)$149.36
• D)$164.29
• E)$205.36

Understand the effect of consumer preferences on demand elasticity.

Comprehend the role of complementary and substitute goods in determining demand elasticity.

Grasp the concept of consumer surplus and how it is affected by price changes.

Identify the significance of income effect and substitution effect on quantity demanded.

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