Table 12.6 Yong Importers, an Asian Import Company, Is Evaluating Two Mutually

question 101

Multiple Choice

Table 12.6
Yong Importers, an Asian import company, is evaluating two mutually exclusive projects, A and B. The relevant cash flows for each project are given in the table below. The cost of capital for use in evaluating each of these equally risky projects is 10 percent.
-The NPVs of Projects A and B are ________. (See Table 12.6)

• A) $95,066 and $56,386, respectively
• B) $56,386 and $95,066, respectively
• C) -$56,386 and -$95,066, respectively
• D) $45,000 and $650,000, respectively

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Definitions:

Market Portfolio

A theoretical bundle of all investable assets in the market, with each asset weighted according to its market capitalization.

Risk-Free Asset

An investment with a certain return and no risk of financial loss, typically represented by government securities.

Risk Level

The degree of uncertainty and/or potential financial loss inherent in an investment decision.

Treasury Bills

Short-term government securities issued at a discount from face value and mature in a year or less, representing a safe and liquid investment option.