Author Question: Depreciation is considered to be an outflow of cash. Indicate whether the statement is true or ... (Read 150 times)

oliviahorn72 · **on:** Jul 10, 2018

Depreciation is considered to be an outflow of cash.

Indicate whether the statement is true or false

Question 2

Consider the following projects, X and Y, where the firm can only choose one. Project X costs 600 and has cash flows of 400 in each of the next 2 years.

Project Y also costs 600, and generates cash flows of 500 and 275 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 10 percent?
A) Project X, since it has a higher NPV than Project Y
B) Project Y, since it has a higher NPV than Project X
C) Project X, since it has a lower NPV than Project Y
D) Project Y, since it has a lower NPV than Project X