The Following Table Gives the Estimated Costs and Benefits of a Proposed

question 30

Multiple Choice

The following table gives the estimated costs and benefits of a proposed public convention center.
Table 11-1

-Two mutually exclusive projects,expected to last indefinitely,are being compared.Program A has annual profits and consumer surplus of $10 million and a one-time capital expenditure of $50 million.Program B has consumer surplus of $15 million and a one-time capital expenditure of $100 million.Using net present value as a criterion,which alternative should be selected?

• A)If the discount rate is 12%,Program B should be selected.
• B)If the discount rate is less than 10%,Program B should be selected.
• C)If the discount rate is 22%,neither program should be selected.
• D)The programs have the same net present value regardless of the discount rate used.
• E)Answers b and c are both correct.

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Definitions:

Abiotic Factors

Non-living chemical and physical parts of the environment that affect living organisms and the functioning of ecosystems.

Ecosystem

A biological community of interacting organisms and their physical environment.

Primary Consumers

Organisms that feed on primary producers; they are usually herbivores that eat plants and algae.

Green Plants

Photosynthetic, plant organisms that contain chlorophyll and produce oxygen as a byproduct of photosynthesis.