Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects

question 20

Multiple Choice

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years, respectively. $$\begin{array} { | l | r | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & 3 \\\hline \text { Project A Cash Flow } & - 1,000 & 300 & 400 & 700 \\\text { Project B Cash Flow } & - 500 & 200 & 400 & 300 \\\hline\end{array}$$

• A)Accept both A and B
• B)Accept neither A nor B
• C)Accept A, reject B
• D)Reject A, accept B

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Definitions:

Selective Encoding

The process of focusing attention on relevant information while ignoring irrelevant information during problem solving and decision making.

Ambient Storage

A method of storage that does not require any artificial temperature control, relying instead on the ambient conditions of the surroundings.

Recursive Automatization

The process through which a task or skill becomes automatic through repetition, reducing the cognitive load required for its execution.

Computer Analogy

The computer analogy in psychology refers to comparing the human mind and its processing of information to the way a computer operates, including input, processing, and output functions.