A financial manager is considering two projects, A and B; both are expected to add 5 million to profits.
Project A is expected to add 5 million to profits this year, while Project B is expected to add 1 million to profits each year over the next five years. Which of the following statements is MOST correct?
A) The manager should select Project A because it maximizes profits.
B) The manager should select the project that maximizes long-term profits, not just one year of profits.
C) The manager should select Project A, of course.
D) The manager should select the project that causes shareholder wealth to increase the most, which could be A or B.
Question 2
Assume that you have 330,000 invested in a stock that is returning 11.50, 170,000 invested in a
stock that is returning 22.75, and 470,000 invested in a stock that is returning 10.25. What is the
expected return of your portfolio?
A) 12.9 B) 14.8 C) 18.3 D) 15.6
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