Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects

question 89

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

Learn the methodology of applying the Friedman test for comparison across multiple groups in matched or paired samples.

Grasp the criteria for choosing appropriate statistical tests based on the type and distribution of the data.

Understand how to frame and test hypotheses for assessing correlations or differences between groups.

Learn the interpretations and implications of test results in practical scenarios or research contexts.

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Definitions:

Discount Rate

The discount rate that is used to compute the present value of forthcoming cash flows.

Annual Payments

Recurring payments made once a year.

Compounded Monthly

Determining interest on a monthly schedule by including both the initial principal and previously earned interest in the calculation.

Mortgage

A loan secured by real property, typically a residential property, where the borrower is obliged to pay back with a predetermined set of payments.