Project H Requires an Initial Investment of $100,000 and the Produces

question 75

Multiple Choice

Project H requires an initial investment of $100,000 and the produces annual cash flows of $45,000 per year for each of the next 3 years. Project T also requires an initial investment of $100,000 and produces cash flows of $30,000 in year 1, $40,000 in year 2, and $70,000 in year 3. If the discount rate is 10% and the projects are not mutually exclusive

• A) Project H should be chosen.
• B) Project T should be chosen.
• C) H and T are equally attractive.
• D) Both projects should be accepted.

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Definitions:

Perfectly Competitive

A market structure characterized by many buyers and sellers, free entry and exit, and a homogenous product, leading to no single consumer or producer having market power.

Short Run

A period in economics where at least one factor of production is fixed, and firms can't adjust all inputs.

Cherry Industry

The market segment that deals with the cultivation, distribution, and sale of cherries.

Long-run Equilibrium

A state in which all factors of production are optimally allocated in the long term, resulting in the efficient operation of markets with no tendencies for change under constant conditions.