Ralph Corp

question 51

Multiple Choice

Ralph Corp. is considering whether to invest $10 million in the jam business or in the peanut butter business. If Ralph invests in jam, it will receive inflows for six different years of $2.5 million each. If it invests in peanut butter, it will receive inflows of $3 million each in years 1, 2, and 3, and $1 million each in years 4, 5, and 6. Which method of evaluating investments will consider the two different investment possibilities to be equally attractive?

• A) Net present value
• B) Internal rate of return
• C) Accounting rate of return
• D) Payback period

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Definitions:

Facility

A physical or virtual location where business operations occur, such as a factory, warehouse, office, or even software platforms.

Period of Time

A length or duration of moments which is measured in terms of seconds, minutes, hours, days, months, or years.

Capacity Decision

A determination made regarding the amount of production resources needed to meet expected demand.

Variable Costs

Costs that vary directly with the level of production or the volume of output.