Suppose Your Firm Is Considering Two Mutually Exclusive, Required Projects

Multiple Choice

Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown as follows. The required rate of return on projects of both of their risk class is 10 percent, and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years, respectively. $$\begin{array} { | l | c | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & 3 \\\hline \text { Project A Cash Flow } & - 1,000 & 300 & 400 & 700 \\\text { Project B Cash Flow } & - 500 & 200 & 400 & 300 \\\hline\end{array}$$

A) Accept both A and B
B) Accept neither A nor B
C) Accept A, reject B
D) Reject A, accept B