Axios,IncIs Considering Project a and Project B,which Are Two Mutually

question 83

Multiple Choice

Axios,Inc.is considering Project A and Project B,which are two mutually exclusive projects with unequal lives.Project A is an eight-year project that has an initial outlay or cost of $180,000.Its future cash inflows for years 1 through 8 are $38,000.Project B is a six-year project that has an initial outlay or cost of $160,000.Its future cash inflows for years 1 through 6 are the same at $36,000.Axios uses the equivalent annual annuity (EAA) method and has a discount rate of 11.50%.Will Axios accept the project?

• A)Axios accepts Project B because it has a more positive EAA.
• B)Axios rejects both projects because both have a negative NPV (and thus negative EAA).
• C)Axios accepts Project A because its EAA is about $2,396 and Project B's EAA is only about $1,097.
• D)Axios accepts Project A because its NPV (and thus EAA)is positive and Project B's NPV (and thus EAA)is negative.

---

Definitions:

Time and Place Utility

The value added to products through making them available at the right time and location to meet consumer needs.

Pipeline

In supply chain, refers to the flow of goods and materials from the supplier to the customer, as well as the processes that move products through the stages of production to delivery.

High-value Products

Goods or services that provide significant value to the customer, often due to their quality, uniqueness, or customization.

Low-value Products

Goods characterized by relatively low unit cost and often perceived as having lower importance or priority in inventory management and logistics planning.