Flint Fruits Is Considering Two Equally Risky,mutually Exclusive Projects,Projects a and B,that

question 85

Multiple Choice

Flint Fruits is considering two equally risky,mutually exclusive projects,Projects A and B,that have the following cash flows:At what WACC would the two projects have the same NPV? $\begin{array}{ccc} \underline { \text { Year } }& \underline { \text { Project A } }& \underline { \text { Project B } }\\0 & -\$ 100,000 & -\$ 100,000 \\1 & 40,000 & 30,000 \\2 & 25,000 & 15,000 \\3 & 70,000 & 80,000 \\4 & 40,000 & 55,000\end{array}$

• A)9.56%
• B)10.33%
• C)11.21%
• D)12.55%

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Definitions:

Accounting Profit

The total revenue of a firm minus the explicit costs directly associated with its operation, such as materials and labor, calculated according to standard accounting practices.

Implicit Cost

The opportunity cost equal to what a firm must give up in order to use resources it already owns for production, without direct payment.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs.