Wilson's Market Is Considering Two Mutually Exclusive Projects That Will

question 63

Multiple Choice

Wilson's Market is considering two mutually exclusive projects that will not be repeated.The required rate of return is 13.9 percent for Project A and 12.5 percent for Project B.Project A has an initial cost of $54,500,and should produce cash inflows of $16,400,$28,900,and $31,700 for Years 1 to 3,respectively.Project B has an initial cost of $69,400,and should produce cash inflows of $0,$48,300,and $42,100,for Years 1 to 3,respectively.Which project,or projects,if either,should be accepted and why?

• A)Project A; because its NPV is positive while Project B's NPV is negative
• B)Project A; because it has the higher required rate of return
• C)Project B; because it has the largest total cash inflow
• D)Project B; because it has a negative NPV which indicates acceptance
• E)Neither project; because neither has an NPV equal to or greater than its initial cost

---

Definitions:

Organizational Goals

The objectives or targets that an organization aims to achieve in a specified timeframe.

Referent Power

A form of influence based on the attraction and admiration one has for an individual, leading to emulation.

Ethical Use

The responsible and morally correct utilization of resources, tools, or information, ensuring fairness, respect, and integrity in one’s actions.

Treat Fairly

The practice of acting in a just and unbiased manner towards individuals or groups.