When Choosing Between Projects,an Alternative to Comparing Their IRRs Is

question 21

Multiple Choice

When choosing between projects,an alternative to comparing their IRRs is:

• A)to compute the incremental IRR,which tells us the discount rate at which it becomes profitable to switch from one project to the other.
• B)to compute the incremental payback period,which tells us the number of years during which it becomes profitable to switch from one project to the other.
• C)to compute the incremental NPV,which tells us the discount rate at which it becomes profitable to switch from one project to the other.
• D)There is no alternative selection criterion to comparing IRRs.

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Definitions:

Variable Selling

Costs that vary directly with the volume of sales, including commissions and shipping fees.

Administrative Expense

Costs related to the general operations of a business that are not directly tied to the production of goods or services.

Cash Disbursements

Payments made in cash by a business, including expenses, debt payments, and dividend distributions.

Raw Materials

The basic materials and components used in the manufacturing process of products.