Suppose Your Firm Is Considering Two Independent Projects with the Cash

question 93

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. $$\begin{array} { l l l l l } \text { Time } & 0 & 1 & 2 & 3 \\\text { Project A Cash Flow } & - 5,000 & 1,000 & 3,000 & 5,000 \\\text { Project B Cash Flow } & - 10,000 & 5,000 & 5,000 & 5,000\end{array}$$ Use the MIRR 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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Definitions:

Mesometrium

The part of the broad ligament of the uterus that encloses the uterus, connecting it to the lateral pelvic walls.

Bulbourethral Gland

A pair of small glands situated on either side of the urethra in males that secrete a fluid that lubricates and neutralizes acidity in the urethra.

Ductus Deferens

A tube that carries sperm from the epididymis to the ejaculatory ducts in preparation for ejaculation.

Epididymis

A coiled tube at the back of the testis where sperm mature and are stored.