Consider Two Mutually Exclusive Projects a & B

question 9

Multiple Choice

Consider two mutually exclusive projects A & B.If you subtract the cash flows of opportunity B from the cash flows of opportunity A,then you should:

• A)take opportunity A if the regular IRR exceeds the cost of capital.
• B)take opportunity A if the incremental IRR exceeds the cost of capital.
• C)take opportunity B if the regular IRR exceeds the cost of capital.
• D)take opportunity B if the incremental IRR exceeds the cost of capital.

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Definitions:

Self-Handicapping

A strategy where individuals create obstacles to their own success to protect self-esteem in case of failure.

Elaboration Likelihood Model

A theory in social psychology that explains different ways of processing stimuli, why they are used, and their outcomes on attitude change.

Dissonance Theory

A theory that suggests people are motivated to reduce the discomfort (dissonance) caused by inconsistencies between their beliefs and their actions.

Balance Model

A theoretical framework for understanding how different elements within a system maintain a state of equilibrium or balance.