A Company Is Considering Two Alternative Investment Opportunities,each of Which

question 63

Essay

A company is considering two alternative investment opportunities,each of which requires an initial cash outlay of $110,000.The expected net cash flows from the two projects follow:
$$\begin{array}{lrr}&\underline{\text{Project A}}&\underline{\text{Project Z}}\\\text{Year 1}&\$30,000&\$44,000\\\text{Year 2}&44,000&70,000\\\text{Year 3}&\underline{70,000}&\underline{30,000}\\\text{Totalst}&\underline{\underline{\$ 144,000}}&\underline{\underline{\$ 144,000}}\end{array}$$
Required:
a,Based on a comparison of their net present values,and assuming the same discount rate (greater than zero)is required for both projects,which project is the better investment? (Check one answer.)
________________ Project A
________________ Project Z
________________ The projects are equally desirable
b.Use the table values below to find the net present value of the cash flows associated with Project A,discounted at 12%:
$$\begin{array} { l c } \underline{\text { Period}} & \underline{\text { Present Value of } 1 \text { at } 12 \%} \\1 & 0.8929 \\2 & 0.7972 \\3 & 0.7118\end{array}$$

---

Definitions:

Psychoactive Drugs

Substances that, when taken, alter brain function, resulting in temporary changes in perception, mood, consciousness, and behavior.

Hallucinogens

Drugs that cause false sensory messages, altering the perception of reality.

Perception

The act of becoming aware of something through the senses, a fundamental aspect of how we experience the world.

Drug Tolerance

The body's reduced reaction to a drug following its repeated use, requiring increased doses to achieve the same effect.