Assume in Analyzing Alternative Proposals That Proposal F Has a Useful

question 110

Multiple Choice

Assume in analyzing alternative proposals that Proposal F has a useful life of 6 years and Proposal J has a useful life of 9 years. What is one widely used method to make the net present values of the proposals comparable?

• A)Ignore the fact that Proposal F has a useful life of 6 years and treat it as if it has a useful life of 9 years.
• B)Adjust the life of Proposal J to a time period that is equal to that of Proposal F by estimating a residual value at the end of year 6.
• C)Ignore the useful lives of 6 and 9 years and find an average (7 1/2 years).
• D)Ignore the useful lives of 6 and 9 years and compute the average rate of return.

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Definitions:

Producer Surplus

The gap between the price at which producers agree to sell a good or service and the price they end up receiving.

Government Incentive

A policy or measure implemented by the government to encourage or discourage specific economic activities.

Free Trade

An economic policy allowing imports and exports to occur without government intervention such as tariffs, quotas, or other restrictions.

Sugar

A sweet-flavored substance sourced primarily from sugarcane and sugar beets, used widely as a sweetener in food and beverages.