Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects

question 25

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. $$\begin{array} { | l | c | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & 3 \\\hline \text { Project A Cash Flow } & - 1,000 & 300 & 400 & 700 \\\text { Project B Cash Flow } & - 500 & 200 & 400 & 300 \\\hline\end{array}$$

• 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:

Personnel Department

The division within an organization tasked with managing employee-related processes including hiring, training, and benefits administration, commonly known as the human resources (HR) department.

Information Technology

The employment of computers, storage systems, networks, and various physical assets, infrastructure, and procedures to generate, process, safeguard, store, and share every type of electronic information.

Step-down Method

An allocation method used in cost accounting to assign overhead costs to different departments based on a hierarchical order.

Labor Hours

The total number of hours worked by employees for which they are compensated, often used as a basis for allocating overhead in cost accounting.