Suppose Project Acquisition and Project Merger Are Mutually Exclusive

question 117

Multiple Choice

Suppose project Acquisition and project Merger are mutually exclusive.Project Acquisition requires an initial cash outlay of $50,000 and is expected to provide after-tax cash flows of $15,000 in year 1,$25,000 in year 2,$20,000 in year 3,and $15,000 in year 4.Project Merger requires an initial cash outlay of $75,000 and is expected to provide after-tax cash flows of $20,000 in year 1,$28,000 in year 2,$35,000 in year 3,and $20,000 in year 4.The appropriate discount rate is 12 percent.What is the crossover rate?

• A) 4.30%
• B) 4.87%
• C) 13.72%
• D) 18.59%

---

Definitions:

Working Memory

A mental system with restricted capability tasked with holding information briefly for the purposes of processing and altering it.

Iconic Memory

A type of visual sensory memory that holds a brief photographic image of a scene that has just been perceived, lasting for a very short period of time.

Automatically Processed

Information or tasks that are performed with little or no conscious effort, often due to repetition or familiarity.

Identification

The psychological process in which an individual assimilates an aspect, property, or attribute of another and is transformed, wholly or partially, by the model the other provides.