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Financial Forensics · End Term · 1 Sept 2024 · May 2024 term · Set QDB3

Question 23: Wilson's Market is considering two mutually exclusive pr…

Question 23

+1 markOne correct option

Wilson's Market is considering two mutually exclusive projects that will not be repeated. The required rate of return is 13.9 percent for Project A and 12.5 percent for Project B. Project A has an initial cost of ₹54,500, and should produce cash inflows of ₹16,400, ₹28,900, and ₹31,700 for Years 1 to 3, respectively. Project B has an initial cost of ₹69,400, and should produce cash inflows of ₹0, ₹48,300, and ₹42,100, for Years 1 to 3, respectively. Which project, or projects, if either, should be accepted and why?___________________

  1. A

    Project A; because its NPV is positive while Project B's NPV is negative

  2. B

    Project A; because it has the higher required rate of return

  3. C

    Project B; because it has the largest total cash inflow

  4. D

    Neither project; because neither has an NPV equal to or greater than its initial cost

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Correct answer

  • A

    Project A; because its NPV is positive while Project B's NPV is negative

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Question 23 of 41 in the IIT Madras BS Financial Forensics (Financial Forensics) End Term paper sat on 1 Sept 2024, in the May 2024 term (IIT M DEGREE AN EXAM QDB3 01 Sep 2024). It carries 1 mark.

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