The Square Box Is Considering Two Independent Projects with an Initial

question 91

Multiple Choice

The Square Box is considering two independent projects with an initial cost of $18,000 each. The cash inflows of Project A are $3,000, $7,000, and $10,000 for Years 1 to 3, respectively. The cash inflows for Project B are $3,000, $7,000, and $15,000 for Years 1 to 3, respectively. The required return is 12 percent and the required discounted payback period is 3 years. Based on discounted payback, which project(s) , if either, should be accepted?

• 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:

Place Utility

Availability of a product in a location convenient for customers.

Title Transfer

The legal process of transferring ownership of property, such as real estate or vehicles, from one party to another.

Location

The geographical place or position of something.

Raw Materials

Basic materials or substances used in the production or manufacturing of goods.