A Firm Is Evaluating Three Capital Projects

question 103

Multiple Choice

A firm is evaluating three capital projects. The net present values for the projects are as follows: The firm should

• A) accept Projects 1 and 2 and reject Project 3.
• B) accept Projects 1 and 3 and reject Project 2.
• C) accept Project 1 and reject Projects 2 and 3.
• D) reject all projects.

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Definitions:

Cost of Goods Sold

Cost of Goods Sold (COGS) refers to the direct costs attributable to the production of the goods sold by a company, including materials and labor costs.

Inventory Items

are goods or products that a business holds for the purpose of sale or production.

Gross Profit

The difference between revenue and the cost of goods sold (COGS), indicating the profit a company makes after deducting the costs associated with making and selling its products or services.

Inventory Purchases

The acquisition of goods and materials a company intends to sell in its ordinary course of business.