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

question 104

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 increases from 10% to 16%

• A) Project T should be chosen.
• B) Both projects should be rejected.
• C) H and T are equally attractive.
• D) The project rankings will change.