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

question 29

Multiple Choice

Nast 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 MIRR rather than the one with the higher NPV,how much value will be foregone? Note that under some conditions choosing projects on the basis of the MIRR will cause $0.00 value to be lost. $\begin{array}{ccccc}\text { WACC: } & 9.00 \% \\&0 & 1 & 2 & 3 & 4 \\\hline \mathrm{CFS}_{\mathrm{S}} &-\$ 1,100 & \$ 375 & \$ 375 & \$ 375 & \$ 375 \\\mathrm{CF}_{\mathrm{L}} &-\$ 2,200 & \$ 725 & \$ 725 & \$ 725 & \$ 725\end{array}$

• A)$24.71
• B)$27.46
• C)$30.51
• D)$33.90

---

Definitions:

Material Charges Formula

A calculation used to determine the direct costs associated with the materials used in the production of goods or services.

Pricing Decisions

Refers to the process of setting the price for a product or service, considering factors like cost, competition, and customer demand.

Legal Issues

Legal issues refer to matters of law encompassing regulations, statutes, and legal precedents that impact individuals, businesses, and relationships.

Political Issues

Challenges and factors related to government policies, regulations, or political stability that can affect business operations.