Yonan IncIs Considering Projects S and L,whose Cash Flows Are Shown

question 67

Multiple Choice

Yonan Inc.is considering Projects S and L,whose cash flows are shown below.These projects are mutually exclusive,equally risky,and not repeatable.If the decision is made by choosing the project with the shorter payback,some value may be forgone.How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost.

• A) $35.82
• B) $43.16
• C) $53.08
• D) $51.36
• E) $38.41

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Definitions:

Marginal Utility

The extra pleasure or advantage (utility) a person receives from using an additional unit of a product or service.

Marginal Utility

The additional satisfaction or benefit received from consuming one more unit of a good or service.

Movie Rental

The practice of paying a fee to borrow a film for a limited period, traditionally through physical stores, or digitally via online platforms.

Choice Set

The collection of all possible options available to a consumer when making a decision.