Two Projects Each Require a Current Cash Expenditure of $10,000

question 19

Multiple Choice

Two projects each require a current cash expenditure of $10,000.Project A will generate cash inflows of $2,000 per year for the next twelve years.Project B is expected to return $6,000 in 1 year,$4,000 at the end of year 2,and $3,000 in 3 years.Which project should be selected if funds are unavailable to finance both and capital costs are 6%?

• A) Project B because it has a shorter payback period.
• B) Project B because it has a higher IRR
• C) Project A because it has a higher IRR
• D) Project A because it has a higher NPV
• E) Project B because it has a higher NPV

---

Definitions:

Load Leg

A component or part of an electrical circuit that carries current from the source to a load and then back to the source, completing the electrical circuit.

Delta-Delta Transformer

A type of three-phase transformer connection where both the primary and secondary windings are connected in a delta configuration.

Turns Ratio

The ratio of the number of turns in the primary winding to the number of turns in the secondary winding of a transformer, determining its voltage transformation characteristics.

Primary Voltage

The voltage at the input of a transformer or any primary side of an electrical system.