325. CSO: 2D2a LOS: 2D2g Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of $150,000 and will operate for five years. The cash flows associated with these projects are as follows. Year Project X Project Y 1 $ 47,000 $ 0 2 47,000 0 3 47,000 0 4 47,000 0 5 47,000 280,000 Total $235,000 $280,000 Staten’s required rate of return is 10 percent. Using the net present value method, which one of the following actions would you recommend to Staten? a. Accept Project X, and reject Project Y. b. Accept Project Y, and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.

2D2G STATEN CORPORATION IS CONSIDERING TWO MUTUALLY EXCLUSIVE PROJECT...

CMA EXAM SUPPORT PACKAGE 2

325.

CSO: 2D2a

LOS: 2D2g

Staten Corporation is considering two mutually exclusive projects. Both require an initial

outlay of $150,000 and will operate for five years. The cash flows associated with these

projects are as follows.

Year

Project X

Project Y

$ 47,000

$ 0

47,000

280,000

Total

$235,000

$280,000

Staten’s required rate of return is 10 percent. Using the net present value method, which

one of the following actions would you recommend to Staten?

Accept Project X, and reject Project Y.

Accept Project Y, and reject Project X.

Accept Projects X and Y.

Reject Projects X and Y.