Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects

question 27

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. $$\begin{array} { l l l l l } \text { Time } & 0 & 1 & 2 & 3 \\\text { Project A Cash Flow } & - 20,000 & 10,000 & 30,000 & 1,000 \\\text { Project B Cash Flow } & - 30,000 & 10,000 & 20,000 & 50,000\end{array}$$ Use the payback 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

---

Definitions:

Intelligence

The ability to learn, understand, and make judgments or have opinions that are based on reason.

Information Processing Capabilities

Refers to the cognitive functions involved in processing, storing, and retrieving information, often likened to how computers process data.

Working Memory

A cognitive system responsible for temporarily holding and processing information, enabling activities such as reasoning, learning, and comprehension.

Rehearsal

The process of repeating to oneself the material that one is trying to remember.