A Division Manager Is Choosing Between Two Mutually Exclusive Projects

question 97

Multiple Choice

A division manager is choosing between two mutually exclusive projects. The company requires any project to earn at least 12 percent.The manager believes that cash inflows from the project can be reinvested at the rate of 12 percent.Which project will the manager likely choose?

• A)Project B
• B)Project A
• C)both Projects A and B
• D)neither Project A nor B

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Definitions:

Real GDP

The measure of the value of economic output adjusted for price changes (inflation or deflation), which reflects the real quantity of goods and services produced.

Stagflation

A situation in economic where slow economic growth and high unemployment occur simultaneously with rising prices (inflation).

Aggregate Demand

Total pull for goods and services in an economy, measured at a specific wide price level during a prescribed time scope.

Economic Boom

A period characterized by significant expansion in the economy, marked by increased production and consumption, lower unemployment rates, and robust economic growth.