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

---

Definitions:

Interstate Commerce

Economic activity, trade, or the movement of goods and services that crosses state borders, falling under the regulatory power of the federal government according to the U.S. Constitution.

National Power

The strength and influence of a country on a global scale, encompassing military, economic, political, and cultural aspects.

Federalism

A system of government where power is divided among a central authority and constituent territorial units.

Sovereignty

Sovereignty is the supreme power or authority of a state to govern itself or another state, free from external control.