Lakeland Ramblers Is Considering Two Mutually Exclusive Projects to Boost

question 1

Multiple Choice

Lakeland Ramblers is considering two mutually exclusive projects to boost their tourist revenue. Project A costs $60,000 and would produce net cash flows of $25,000 for 5 years. Project B costs $100,000 and will produce annual net cash flows of $25,000 for 10 years. If Lakeland's cost of capital is 12%, which project should be chosen using the equivalent annual annuity method?

• A) Project A, as NPV is $17,941 higher
• B) Project B, as NPV is $11,125 higher
• C) Project A, as NPV is $28,383 higher
• D) Project B, as NPV is $21,567 higher

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Definitions:

Apoptosis

A process of programmed cell death that occurs in multicellular organisms, crucial for development and maintaining health.

Outer Bark

The external layer of the tree's bark, composed of dead cells, that serves as a protective layer against physical damage and disease.

Woody Plants

Woody plants are types of vegetation that develop hard, fibrous structural tissue called wood, used for support and water transport.

Periderm

A protective tissue in plants that replaces the epidermis in parts that undergo secondary growth, such as in tree bark.