ABC Ltd and DEF Ltd Are Each Considering the Same

question 39

Multiple Choice

ABC Ltd and DEF Ltd are each considering the same two investment projects;Project G and Project H.These two projects are mutually exclusive.The cash flows produced by each project are the same for both companies.These cash flows are given below: The required rate of return of ABC Ltd is 6.3% whilst the required rate of return of DEF ltd is 4.1% pa.The IRR is Project G is 7.27% whilst the IRR of Project H is 7.87%.Which project should each company invest in if they wish to maximise shareholder wealth?

• A)ABC Ltd should chose Project G and DEF Ltd should chose Project G.
• B)ABC Ltd should chose Project H and DEF Ltd should chose Project H.
• C)ABC Ltd should chose Project H and DEF Ltd should chose Project G.
• D)ABC Ltd should chose Project G and DEF Ltd should chose Project H.

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Definitions:

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A method of writing or presenting information in the form of a story or account of events.

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The services rendered by healthcare professionals to individuals seeking to improve or maintain their health status.