Your Company Is Considering an Investment in One of Two

question 67

Multiple Choice

Your company is considering an investment in one of two mutually exclusive projects.Project one involves a labor intensive production process.Initial outlay for Project 1 is $1,495 with expected after tax cash flows of $500 per year in years 1-5.Project two involves a capital intensive process,requiring an initial outlay of $6,704.After tax cash flows for Project 2 are expected to be $2,000 per year for years 1-5.Your firm's discount rate is 10%.If your company is not subject to capital rationing,which project(s) should you take on?

• A)Project 1
• B)Project 2
• C)Projects 1 and 2
• D)Neither project is acceptable.

---

Definitions:

Citrate

A salt or ester of citric acid, often involved in energy production within living organisms' cellular respiration pathways.

Prostate Gland

A gland in the male reproductive system that surrounds the neck of the bladder and urethra, responsible for secreting components of semen.

Calcium Ions

Essential ions in the body that play crucial roles in muscle contractions, neural signaling, and blood coagulation.

Phosphate Ions

Chemical species formed by the dissociation of phosphoric acid, important in cellular energy and bone formation.