A Firm Utilizes a Strategy of Capital Rationing, Which Is

question 53

Multiple Choice

A firm utilizes a strategy of capital rationing, which is currently $375,000 and is considering the following two projects: Project A has a cost of $335,000 and the following cash flows: year 1 $140,000; year 2 $150,000; and year 3 $100,000. Project B has a cost of $365,000 and the following cash flows: year 1 $220,000; year 2 $110,000; and year 3 $150,000. Using a 6% cost of capital, what is the net present value of project A?

• A) $25,930
• B) $14,520
• C) $11,589
• D) $19,230

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Definitions:

Weber's Rationalization

A concept that describes the process of modern society increasingly concerned with efficiency, predictability, and control, leading to practices that prioritize logic and calculation over tradition and values.

Supervise

To oversee or manage the work or performance of others, ensuring that tasks or projects are completed effectively and correctly.

Extracurricular Activities

Activities that students participate in outside of the regular academic curriculum, which may include sports, clubs, music, arts, and volunteer work.

Political Economy

The study of production, trade, and their relationship with law, custom, and government, as well as with the distribution of national income and wealth.