Farmer Co Is Considering Projects S and L, Whose Cash Flows

question 48

Multiple Choice

Farmer Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback, some value may be forgone. How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost.

• A) $24.14
• B) $26.82
• C) $29.80
• D) $33.11
• E) $36.42

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Definitions:

Clean Commerce

Business practices and operations that are environmentally sustainable and minimize harm to the environment and to human health.

Radical Incrementalism

An approach that combines small, gradual changes with occasional significant, transformative shifts to achieve long-term goals.

Sustainability Lens

An approach to making decisions that consider the long-term impacts on environmental, social, and economic factors.

Rate of Replenishment

The speed at which resources are renewed or restocked to their original levels.