Chandler Tire Co

question 51

Multiple Choice

Chandler Tire Co.is trying to decide which one of two projects it should accept.Both projects have the same start-up costs.Project 1 will produce annual cash flows of $52,000 a year for six years.Project 2 will produce cash flows of $48,000 a year for eight years.The company requires a 15 percent rate of return.Which project should the company select and why?

• A)Project 1, because the annual cash flows are greater by $4,000 than those of Project 2
• B)Project 1, because the present value of its cash inflows exceeds those of Project 2 by $14,211.62
• C)Project 2, because the total cash inflows are $72,000 greater than those of Project 1
• D)Project 2, because the present value of the cash inflows exceeds those of Project 1 by $18,598.33
• E)It does not matter as both projects have almost identical present values.

---

Definitions:

Sense of Humor

The ability to perceive, enjoy, or express what is amusing, comical, incongruous, or absurd.

Rare Personality Types

Personality classifications that are infrequently encountered within the general population, often discussed in the context of psychological typologies.

Projective Tests

Psychological assessments where subjects interpret ambiguous stimuli, revealing hidden emotions and internal conflicts.

Projection

A defense mechanism where individuals attribute their own unacceptable thoughts, feelings, or motives to another person.