Current Design Co A) $13810
B) $149

question 67

Multiple Choice

Current Design Co.is considering two mutually exclusive, equally risky, and not repeatable projects, S and L.Their cash flows are shown below.The CEO believes the IRR is the best selection criterion, while the CFO advocates the NPV.If the decision is made by choosing the project with the higher IRR rather than the one with the higher NPV, how much, if any, value will be forgone, i.e., what's the chosen NPV versus the maximum possible NPV? Note that (1) "true value" is measured by NPV, and (2) under some conditions the choice of IRR vs.NPV will have no effect on the value gained or lost. $$\begin{array}{l}\text { r: } 7.50 \%\\\begin{array} { c c c c c c } \text { Y ear } & 0 & 1 & 2 & 3 & 4 \\\hline \mathrm { CF } _ { \mathrm { S } }& - \$ 1,100 & \$ 550 & \$ 600 & \$ 100 & \$ 100 \\\mathrm { CF } _ { \mathrm { L } } & - \$ 2,700 & \$ 650 & \$ 725 & \$ 800 & \$ 1,400\end{array}\end{array}$$

• A) $138.10
• B) $149.21
• C) $160.31
• D) $171.42
• E) $182.52

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Definitions:

Proletariat

The working class or laboring class; specifically, those who do not own the means of production and must sell their labor to survive.

Bourgeoisie

The middle class in capitalist societies, owning means of production and employing labor power for profit.

Instrumental Rationality

A type of reasoning or logic focused on selecting the most efficient means to achieve a specific goal or end, without necessarily considering ethical or moral implications.

Welfare Policies

Government initiatives designed to support the well-being of the population, particularly the most vulnerable, through services and financial assistance.