A Firm Is Trying to Determine Which of Two Products

question 59

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 $11,000 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.

Understand the concept and accounting treatment of goodwill.

Familiarize with the depletion method used for natural resources.

Comprehend the legal life of copyrights and the amortization of intangible assets.

Know how to record the amortization of patents.

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Definitions:

Organizational Goals

Objectives or targets that a company aims to achieve, which guide its operations and strategic planning.

Communication

The process of exchanging information, ideas, thoughts, and feelings through verbal or non-verbal methods, such as speaking, writing, or using technology.

Internal Noise

Psychological or emotional disturbances that interfere with the ability to process information or communicate effectively.

Complex Language

A system of communication that allows for the expression of nuanced and detailed ideas, emotions, and information.