The Square Box is considering two projects, both of which have an initial cost of $35,000 and total cash inflows of $50,000. The cash inflows of project A are $5,000, $10,000, $15,000, and $20,000 over the next four years, respectively. The cash inflows for project B are $20,000, $15,000, $10,000, and $5,000 over the next four years, respectively. Which one of the following statements is correct if The Square Box requires a 12 percent rate of return and has a required discounted payback period of 3.5 years?
A)Both projects should be accepted.
B)Both projects should be rejected.
C)Project A should be accepted and project B should be rejected.
D)Project A should be rejected and project B should be accepted.
E)You should be indifferent to accepting either or both projects.

Question

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The Answer of The Square Box is considering two projects, both of which have an initial cost of $35,000 and total cash inflows of $50,000. The cash inflows of project A are $5,000, $10,000, $15,000, and $20,000 over the next four years, respectively. The cash inflows for project B are $20,000, $15,000, $10,000, and $5,000 over the next four years, respectively. Which one of the following statements is correct if The Square Box requires a 12 percent rate of return and has a required discounted payback period of 3.5 years?
A)Both projects should be accepted.
B)Both projects should be rejected.
C)Project A should be accepted and project B should be rejected.
D)Project A should be rejected and project B should be accepted.
E)You should be indifferent to accepting either or both projects.

The Square Box Is Considering Two Projects, Both of Which