Suppose Your Firm Is Considering Two Independent Projects with the Cash

question 109

Multiple Choice

Suppose your firm is considering two independent projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 12 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three years, respectively. $$\begin{array} { | l | r | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & 3 \\\hline \text { Project A Cash Flow } & - 5,000 & 1,000 & 3,000 & 5,000 \\\text { Project B Cash Flow } & - 10,000 & 5,000 & 5,000 & 5,000 \\\hline\end{array}$$
Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?

• 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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Government Spending

Expenditures made by the government for its operations, investments, and social programs.

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Financial support provided by the government to individuals, businesses, or industries, usually to encourage the production of certain goods or services.

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Agricultural producers who specialize in the cultivation of cotton plants for the fiber and seeds they produce.

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Testimony that is given in court by a witness who relates not what he or she knows personally, but what others have said, and that is therefore generally not admissible as evidence.