A Firm Is Evaluating Two Projects That Are Mutually Exclusive

question 107

Multiple Choice

A firm is evaluating two projects that are mutually exclusive with initial investments and cash flows as follows:
$\begin{array}{rr}\text { Project: A }&&\text { Project: B }\\\hline\text { Initial } & \text { End-of-Year } & \text { Initial } & \text { End-of-Year } \\\text { Investment } & \text { Cash Flows } & \text { Investment } & \text { Cash Flows }\\\hline\$40,000&\$20,000&\$90,000&\$40,000\\&20,000 && 40,000 \\&20,000 && 80,000\end{array}$
-If the firm in Figure 12.5 has a required payback of two (2) years, they should

• A) reject project A and accept B.
• B) accept projects A and B.
• C) accept project A and reject B.
• D) reject both.

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Definitions:

Capacity Planning

Capacity Planning involves the process of determining the production capacity needed by an organization to meet changing demands for its products or services.

Aggregate Planning

A process by which a company determines optimal levels of capacity, production, subcontracting, inventory, stockouts, and pricing strategies over a specified time frame.

Short-Term Schedules

Plans that outline specific activities, resources, and timelines within a short timeframe, typically up to one year.

Forward Scheduling

Forward scheduling is a planning method where tasks are scheduled from the start date onwards to determine the earliest possible completion time.