Scanlon Inc A)$14659
B)$154

question 18

Multiple Choice

Scanlon 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 higher IRR,how much value will be foregone? Note that under certain conditions,choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV. $\begin{array}{ccccc}\text { WACC: } & 10.00 \% \\&0 & 1 & 2 & 3 & 4 \\\hline \mathrm{CFS}_{\mathrm{S}} &\$ 2,050 & \$ 750 & \$ 760 & \$ 770 & \$ 780 \\\mathrm{CF}_{\mathrm{L}} &-\$ 4,300 & \$ 1,500 & \$ 1,518 & \$ 1,536 & \$ 1,554\end{array}$

• A)$146.59
• B)$154.30
• C)$162.42
• D)$178.67

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in the open market.

Expected Profit

The anticipated earnings from an investment or business venture after accounting for potential risks and expenses.

Loanable Funds

The total amount of capital available for borrowing, comprised of savings from individuals, businesses, and government, which is available for investment purposes.

Commercial Paper

A short-term, unsecured promissory note issued by corporations, often used for the financing of accounts receivable, inventories, and meeting short-term liabilities.