A Firm Is Trying to Determine Which of Two Products

question 52

Multiple Choice

A firm is trying to determine which of two products it should launch. Product A has an expected life of three years. It will bring in cash flows of $10,000 in each of the three years. Product B has an expected life of two years. It will bring in cash flows of $15,000 in each of the two years. Assume a discount rate of 8%. Which product should the firm, based on NPV alone, select?

• A) Product A
• B) Product B
• C) Product A and B are equivalent
• D) NPV for the products cannot be calculated with the information given.

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Definitions:

Role Conflict

Occurs when there are incompatible demands placed upon a person by two or more statuses or roles they hold, leading to stress and difficulty in satisfying the demands of all roles.

Professional Obligations

Duties or responsibilities that come with one's profession, including adherence to ethical standards and commitment to properly performing job roles.

Role

The set of behaviors expected of someone because of their status.

Master Status

A status that is always relevant and affects all other statuses we possess.