A Firm Is Considering a New Capital Expenditure of $2

Multiple Choice

A firm is considering a new capital expenditure of $2 million. This expenditure is expected to yield $1 million in annual profits for each of two years. Given this information, the firm should _____ the project, _____

A) refuse; since the costs are not offset by the profits.
B) undertake; since the profits will be greater than the costs.
C) undertake; only if the interest rate is zero.
D) undertake; regardless of the interest rate.