Alpha and Beta Are Separate fiRms That Are Both Considering

question 134

Multiple Choice

Alpha and Beta are separate firms that are both considering an oil exploration project. Alpha currently operates an oil refining and distribution network and has an after-tax cost of capital of 12
Percent. Beta owns oil fields and concentrates on oil production. Beta's after-tax cost of capital is 15
Percent. The project under consideration has initial costs of $150,000 and anticipated annual cash
Inflows of $32,000 a year for ten years. Which firm(s) should accept this project, if any?

• A) Alpha only.
• B) Beta only.
• C) Both Alpha and Beta.
• D) Neither Alpha nor Beta.
• E) Cannot be determined without further information.

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Definitions:

Physical Products

Tangible items or goods that are manufactured, sold, and used in commerce, as opposed to digital or virtual products.

Online Sales

Transactions that occur on the internet where buyers purchase goods or services from sellers over digital platforms.

Retail Store

A physical or digital establishment that sells goods directly to the public for personal or household consumption.

Single Distribution Network

A centralized distribution method where all products are delivered from a single facility or warehouse to all consumers or retailers.