A Company Is Considering Four Mutually Exclusive Projects A,B,C,and D

question 65

Multiple Choice

A company is considering four mutually exclusive projects A,B,C,and D.Project A requires an initial investment of $100,000 and is expected to generate after-tax cash flows of $62,500 per year for two years.Project B requires an initial investment of $160,000 and is expected to generate after-tax cash flows of $72,000 per year for three years.Project C requires an initial investment of $125,000 and is expected to generate $45,000 per year for four years.Project D requires an initial investment of $200,000 and is expected to generate after-tax cash flows of $87,500 per year for three years.The appropriate discount rate is 10 percent.Rank the projects by their PIs in descending order.

• A) A, B, C, D
• B) B, C, A, D
• C) C, B, D, A
• D) D, A, B, C

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