Carolina Company Is Considering Projects S and L, Whose Cash

question 46

Multiple Choice

Carolina Company is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and are not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under some conditions choosing projects on the basis of the IRR will cause $0.00 value to be lost. $\begin{array} { c c c c c c } r : 7.75 \% & & & & \\\text { Year } & { 0} & 1 & 2 & 3 & 4 \\\mathrm{CF}_{\mathrm{S}}& - \$ 1,050 & \$ 675 & \$ 650 & & \\\mathrm { CF } _ { \mathrm { L } } & - \$ 1,050 & \$ 360 & \$ 360 & \$ 360 & 360\end{array}$

• A) $11.45
• B) $12.72
• C) $14.63
• D) $16.82
• E) $19.35

Use a financial calculator to determine the term of ordinary annuities.

Calculate the difference in payoff times under varying monthly payment scenarios on a loan with interest compounded monthly.

Compare the economic value of different annuity options under various conditions.

Calculate the savings accumulation time required to reach a financial goal with periodic deposits and compound interest.

---

Definitions:

Customer Loyalty Programs

Marketing strategies designed to encourage customers to continue to shop at or use the services of a business associated with the program.

Marketing Website

Website whose main purpose is to increase purchases by visitors.

Corporate Website

Website designed to increase a company’s visibility, promote its offerings, and provide information to interested parties.

High-Tech Scam

Fraudulent activities using advanced technology to deceive individuals or organizations.