Chandler Tire Co

question 16

Multiple Choice

Chandler Tire Co. is trying to decide which one of two projects it should accept. Both projects have the same start-up costs. Project 1 will produce annual cash flows of $52,000 a year for 6 years. Project 2 will produce cash flows of $48,000 a year for 8 years. The company requires a 15 percent rate of return. Which project should the company select and why?

• A) Project 1; because the annual cash flows are greater than those of Project 2
• B) Project 1; because the present value of its cash inflows exceeds those of Project 2 by $14,211.62
• C) Project 2; because the total cash inflows are $70,000 greater than those of Project 1
• D) Project 2; because the present value of the cash inflows exceeds those of Project 1 by $18,598.33
• E) It does not matter as both projects have almost identical present values.

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Definitions:

Knowing-Doing Gap

The disconnect between knowing what needs to be done and actually doing it, often hindering organizational performance and outcomes.

Toyota Production System

A manufacturing methodology developed by Toyota that emphasizes efficiency, quality, and continuous improvement, focusing on eliminating waste.

Web-Enabled Input

Data or information input methods that are facilitated through web technologies, allowing for interaction or data entry via the internet.

Skilled Workers

Individuals who have acquired expertise, abilities, and experience in a particular field or job through education or training.