Question
Projects A and B are mutually exclusive and have an initial cost of $82,000 each. Project A provides cash inflows of $34,000 a year for
Projects A and B are mutually exclusive and have an initial cost of $82,000 each. Project A provides cash inflows of $34,000 a year for three years while Project B produces a cash inflow of $114,300 in Year 3. Which project(s) should be accepted if the discount rate is 11.7 percent? What if the discount rate is 13.5 percent?
- A. Accept B at 11.7 percent and neither at 13.5 percent
- B. Accept A at both discount rates
- C. Accept both at 11.7 percent and neither at 13.5 percent
- D. Accept A at 11.7 percent and neither at 13.5 percent
- E. Accept B at both discount rates
A project has expected cash inflows, starting with Year 1, of $900, $1,200, $1,500, and finally in Year 4, $2,000. The profitability index is 1.06 and the discount rate is 12 percent. What is the initial cost of the project?
- A. $3,692.71
- B. $3,211.06
- C. $4,250.00
- D. $4,098.91
- E. $3,866.90
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