Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects

question 81

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 8 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and three years, respectively. $$\begin{array} { | l | c | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & \\\hline \text { Project A Cash Flow } & - 20,000 & 10,000 & 30,000 & \\\text { Project B Cash Flow } & - 30,000 & 10,000 & 20,000 & 50,000 \\\hline\end{array}$$

• 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:

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