Rosalie Woischke is an executive with ColaCo, a nationally known beverage company. Woischke is trying to determine the firm's optimal capital budget. First, Woischke is analyzing projects Sparkle and Fizz. She has determined that both Sparkle and Fizz are profitable and is planning on having ColaCo accept both projects. Woischke is particularly excited about Sparkle because if Sparkle is profitable over the next year, ColaCo will have the opportunity to decide whether or not to invest in a third project, Bubble. Which of the following terms best describes the type of projects represented by Sparkle and Fizz as well as the opportunity to invest in Bubble? A. Sparkle and Fizz: Independent projects; Opportunity to invest in Bubble: Add-on project B. Sparkle and Fizz: Independent projects; Opportunity to invest in Bubble: Project sequencing C. Sparkle and Fizz: Mutually exclusive projects; Opportunity to invest in Bubble: Project sequencing

Question

Lily Esparza

Social Studies

10 November, 01:40

Rosalie Woischke is an executive with ColaCo, a nationally known beverage company. Woischke is trying to determine the firm's optimal capital budget. First, Woischke is analyzing projects Sparkle and Fizz. She has determined that both Sparkle and Fizz are profitable and is planning on having ColaCo accept both projects. Woischke is particularly excited about Sparkle because if Sparkle is profitable over the next year, ColaCo will have the opportunity to decide whether or not to invest in a third project, Bubble. Which of the following terms best describes the type of projects represented by Sparkle and Fizz as well as the opportunity to invest in Bubble? A. Sparkle and Fizz: Independent projects; Opportunity to invest in Bubble: Add-on project B. Sparkle and Fizz: Independent projects; Opportunity to invest in Bubble: Project sequencing C. Sparkle and Fizz: Mutually exclusive projects; Opportunity to invest in Bubble: Project sequencing

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Answers (2)

Know the Answer?

Aliya Allison · Answer 1

C

Explanation:

The potential for Bubble to succeed is dependent on Sparkle, defining Bubble as project sequencing

Abel Gordon · Answer 2

B. Independent projects Project sequencing

Explanation:

Independent projects are projects for which the cash flows are independent from one another and can be evaluated based on each project's individual profitability. Since Woischke is accepting both projects, the projects must be independent. If the projects were mutually exclusive, only one of the two projects could be accepted. The opportunity to invest in Bubble is a result of project sequencing, which means that investing in a project today creates the opportunity to decide to invest in a related project in the future.