Langton Inc A) $18590
B) $197

question 80

Multiple Choice

Langton Inc.is considering Projects S and L,whose cash flows are shown below.These projects are mutually exclusive,equally risky,and not repeatable.The CEO believes the IRR is the best selection criterion,while the CFO advocates the MIRR.If the decision is made by choosing the project with the higher IRR rather than the one with the higher MIRR,how much,if any,value will be forgone.In other words,what's the NPV of the chosen project versus the maximum possible NPV? Note that (1) "true value" is measured by NPV,and (2) under some conditions the choice of IRR vs.MIRR will have no effect on the value lost. $\begin{array}{lccccc}\text { WACC: } & 7.00 \% & & & \\\text { Year } & 0 & 1 & 2 & 3 & 4 \\ \mathrm{CF}_{\mathrm{S}} & -\$ 1,100 & \$ 550 & \$ 600 & \$ 100 & \$ 100 \\\mathrm{CF}_{\mathrm{L}} & -\$ 2,750 & \$ 725 & \$ 725 & \$ 800 & \$ 1,400\end{array}$

• A) $185.90
• B) $197.01
• C) $208.11
• D) $219.22
• E) $230.32

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Definitions:

Selection Bias

A distortion in the statistical analysis caused by a non-random selection of data, leading to misleading conclusions.

Random Sample

A subset of individuals chosen from a larger set, where each individual has an equal chance of being selected.

Selection Bias

The bias introduced into research results when participants are not randomly chosen, potentially causing the sample to not accurately represent the larger population.

Serious Medical Issues

Health conditions that require extensive medical attention, potentially including complex procedures or long-term care.