Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time 3 -36,000 -46,000 Project A Cash Flow 26,000 46,000 17,000 Project B Cash Flow 26,000 36,000 66,000 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?
Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively. Time 3 -36,000 -46,000 Project A Cash Flow 26,000 46,000 17,000 Project B Cash Flow 26,000 36,000 66,000 Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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Transcribed Image Text:Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of
both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years,
respectively.
Time
1
Project A Cash Flow
-36,000
26,000
46,000
17,000
Project B Cash Flow
-46,000
26,000
36,000
66,000
Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?
Multiple Choice
Reject A, accept B
Accept A, reject B
Accept both A and B
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Transcribed Image Text:Project A Casn Flow
-30, U00
UU , ט4
UU , ט4
17,000
Project B Cash Flow
-46,000
26,000
36,000
66,000
Use the NPV decision rule to evaluate these projects; which one(s) should be accepted or rejected?
Multiple Choice
Reject A, accept B
Accept A, reject B
Accept both A and B
Accept neither A nor B
< Prev
10 of 18
Next >
MacBook Air
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