Yawl Inc Must Choose Between Two Business Opportunities: Opportunity 1 Will

question 74

Essay

Yawl Inc. must choose between two business opportunities: Opportunity 1 will generate $40,000 before-tax cash flow in years 0, 1, and 2, with a $7,000 annual tax cost. Opportunity 2 will also generate $40,000 before-tax cash flow in years 0, 1, and 2. However, the tax cost will be $15,000 in year 0, $2,500 in year 2, and $2,500 in year 3. Which opportunity should Yawl choose if it uses a 6% discount rate to compute NPV (round the calculations to the nearest whole dollar)?

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Definitions:

Leisure

Free time available to an individual after all work or economic activities have been completed, often used for rest, recreation, or other personal activities.

Utility Function

A mathematical representation of how consumer preferences over bundles of goods or services translate into levels of satisfaction or utility.

Leisure

Time free from the demands of work or duty, where individuals may choose to engage in activities for relaxation, enjoyment, or other personal satisfaction.

Consumption

The use of goods and services by households, referring to the action and effect of consuming products.