Yonan IncIs Considering Projects S and L,whose Cash Flows Are Shown

question 102

Multiple Choice

Yonan Inc.is considering Projects S and L,whose cash flows are shown below.These projects are mutually exclusive,equally risky,and not repeatable.If the decision is made by choosing the project with the shorter payback,some value may be foregone.How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost. $\begin{array}{ccccc}\text { WACC: } & 10.00 \% \\&0 & 1 & 2 & 3 & 4 \\\hline \mathrm{CFS}_{\mathrm{S}} &-\$ 1,000 & \$ 500 & \$ 800 & \$ 0 & \$ 0 \\\mathrm{CF}_{\mathrm{L}} &-\$ 2,100 & \$ 400 & \$ 800 & \$ 800 & \$ 1,000\end{array}$

• A)$55.16
• B)$66.42
• C)$78.79
• D)$93.16

---

Definitions:

Associations

are organized groups of people who share common interests, goals, or purposes and often work together to achieve these objectives.

Stakeholders

Individuals, groups, or organizations that have an interest or concern in an organization’s activities and outcomes.

Nonprofit Organizations

Entities that operate for a purpose other than generating profit, focusing on providing services or support for social, cultural, or environmental causes.

Satisfy Customers

The business goal of meeting or exceeding the needs and expectations of customers, often leading to increased loyalty and repeat business.