Ace Inc Is Evaluating Two Mutually Exclusive Projects-Project a and Project

question 6

Multiple Choice

Ace Inc. is evaluating two mutually exclusive projects-Project A and Project B. The initial cash outflow is $50,000 for each project. Project A results in cash inflows of $15,625 at the end of each of the next five years. Project B results in one cash inflow of $99,500 at the end of the fifth year. The required rate of return of Ace Inc. is 10 percent. Ace Inc. should invest in:

• A) Project B because it has no cash inflows in the first four years of its life.
• B) Project B because it has a higher net present value (NPV).
• C) Project A because it will yield cash every year for five years.
• D) Project A because it has a positive net present value (NPV).
• E) Project A because it will generate cash in the initial years of its life.

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Definitions:

Cognitive Arousal Theory

A framework suggesting that cognitive processes, such as expectations and interpretations, can influence the level and experience of arousal.

Facial Feedback Hypothesis

The theory that suggests facial expressions can influence emotional experiences.

Emotional Experiences

Subjective feelings and responses to events or stimuli that can influence thinking, behavior, and physical states.

Stress

A physical or emotional response to perceived challenges or threats, which can affect mental and physical health.