Corey Is Considering Two Projects Both of Which Have an Initial

question 91

Multiple Choice

Corey is considering two projects both of which have an initial cost of $20,000 and total cash inflows of $25,000. The cash inflows of project A are $3,000, $5,000, $8,000, and $9,000 over the
Next four years, respectively. The cash inflows for project B are $9,000, $8,000, $5,000, and
$3,000 over the next four years, respectively. Which one of the following statements is correct if
Corey requires a 10 percent rate of return and has a required discounted payback period of 3
Years?

• A) Both projects should be accepted.
• B) Both projects should be rejected.
• C) Project A should be accepted and project B should be rejected.
• D) Project A should be rejected and project B should be accepted.
• E) You should be indifferent to accepting either or both projects.

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Definitions:

Linear Regression

A statistical method that models the relationship between a dependent variable and one or more independent variables by fitting a linear equation to observed data.

Regression Analysis

A statistical method for estimating the relationships among variables, often used to predict the value of a dependent variable based on the values of one or more independent variables.

Unknown Value

A value in a dataset or an equation that is not known or has not been determined.

Statistical Method

A collection of mathematical procedures and principles used for analyzing, interpreting, and presenting empirical data.