You Are Considering Two Independent Projects That Have a Required

question 35

Multiple Choice

You are considering two independent projects that have a required return of 15 percent.Project A has an initial cost of $198,700 and cash inflows of $67,200,$109,600,and $88,700 for Years 1 to 3,respectively.Project B has an initial cost of $102,000 and cash inflows of $37,600 and $91,200 for Years 1 and 2,respectively.Given this information,which one of the following statements is correct based on the NPV and IRR methods of analysis?

• A)You should accept both projects.
• B)You should accept Project A and reject Project B.
• C)You should accept Project B and reject Project A.
• D)NPV indicates accept Project A while IRR indicates accepting Project B.
• E)You should reject both projects.

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Definitions:

Repeat Business

The act of a customer returning to purchase goods or services from a business after their initial transaction.

Photograph

An image created by capturing light on a photosensitive surface such as film or a digital sensor.

Revise Their Choice

The act of reconsidering and potentially altering one's decision based on new information or reflection.

Satisfied With Choice

A feeling of contentment or happiness with a decision made.