Question
Cooper Woodworking is considering two projects, both of which have an initial cost of $65,000 and total cash inflows of $80,000. The cash inflows of
Cooper Woodworking is considering two projects, both of which have an initial cost of $65,000 and total cash inflows of $80,000. The cash inflows of project A are $10,000, $15,000, $25,000, and $30,000 over the next four years, respectively. The cash inflows for project B are $30,000, $25,000, $15,000, and $10,000 over the next four years, respectively. Which one of the following statements is correct if Cooper requires a 10.5 percent rate of return andalso has a required payback period of 4 years?
Both projects should be accepted.
Both projects should be rejected.
Project A should be accepted and project B should be rejected.
Project A should be rejected and project B should be accepted.
You should be indifferent to accepting either or both projects.
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