Projects a and B Are Mutually Exclusive and Have an Initial

question 24

Multiple Choice

Projects A and B are mutually exclusive and have an initial cost of $82,000 each. Project A provides cash inflows of $34,000 a year for three years while Project B produces a cash inflow of $115,000 in Year 3. Which project(s) should be accepted if the discount rate is 11.7 percent? What if the discount rate is 13.5 percent?

• A) Accept A at both discount rates
• B) Accept A at 11.7 percent and neither at 13.5 percent
• C) Accept B at both discount rates
• D) Accept both at 11.7 percent and neither at 13.5 percent
• E) Accept B at 11.7 percent and neither at 13.5 percent

---

Definitions:

Cash Flow From Operations

represents the net amount of cash generated by a company's normal business operations, excluding financing and investing activities.

Net Income

The total profit or loss of a company after all income and expenses, including taxes, have been accounted for.

Common Size Balance Sheet

A balance sheet that displays all line items as a percentage of a common base figure, enabling comparison across different periods or companies.

Accounts Receivable

Money owed to a company by its customers for goods or services sold on credit.