Trudeau, Inc

question 11

Multiple Choice

Trudeau, Inc. is considering Project A and Project B, which are two mutually exclusively projects with unequal lives. Project A is an eight-year project that has an initial outlay or cost of $140,000. Its future cash inflows for years 1 through 8 are the same at $36,500. 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 $48,000. Trudeau uses the equivalent annual annuity (EAA) method and has a discount rate of 13%. Which project(s) , if any, will Trudeau accept?

• A) Trudeau will take Project B because it has a positive NPV and its EAA is greater than that for Project A.
• B) Trudeau rejects both projects because both have a negative NPV (and thus negative EAA).
• C) Trudeau accepts both projects because both have a positive NPV (and thus positive EAA).
• D) Trudeau accepts Project A because its EAA of about $7,975 is greater than Project B's EAA of about $6,440.

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Definitions:

Abdominal Binder

A wide compression belt that encircles the abdomen to provide support and reduce pain or swelling after surgery or injury.

Edema

Swelling caused by excess fluid trapped in the body's tissues, often affecting the extremities like hands, arms, feet, ankles, and legs.

Skin Assessment

A thorough evaluation of the skin to identify any conditions, diseases, or abnormalities, often conducted by healthcare professionals.

Hyperemia

An increase in blood flow to different tissues in the body, often resulting in redness and warmth.