Suppose Your Firm Is Considering Two Mutually Exclusive,required Projects with the Cash

question 108

Multiple Choice

Suppose your firm is considering two mutually exclusive,required projects with the cash flows shown as follows.The required rate of return on projects of both of their risk class is 8 percent,and the maximum allowable payback and discounted payback statistic for the projects are two and three years,respectively.
Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?

• A)Accept both A and B
• B)Accept neither A nor B
• C)Accept A, reject B
• D)Reject A, accept B

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Definitions:

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Regular payments made every month towards the repayment of a loan, mortgage, or other financial obligation.

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The failure of one of the parties to a contract to do what was previously agreed upon.

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The difference between the total credits and total debits in an account, or the state of having equal weight or power.

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