A Firm Utilizes a Strategy of Capital Rationing, Which Is

question 53

Multiple Choice

A firm utilizes a strategy of capital rationing, which is currently $375,000 and is considering the following two projects: Project A has a cost of $335,000 and the following cash flows: year 1 $140,000; year 2 $150,000; and year 3 $100,000. Project B has a cost of $365,000 and the following cash flows: year 1 $220,000; year 2 $110,000; and year 3 $150,000. Using a 6% cost of capital, what is the net present value of project A?

• A) $25,930
• B) $14,520
• C) $11,589
• D) $19,230

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Definitions:

Myopia

A common vision condition characterized by difficulty in seeing distant objects clearly, often referred to as nearsightedness.

Dacryoma

A tumor of the lacrimal sac or gland, often related to the tear production system.

Chalazion

A small, usually painless, lump or swelling on the eyelid, caused by a blockage in one of the oil glands.

Blepharitis

An inflammatory condition affecting the eyelids, often associated with irritation, burning, and itching.