Projects a and B Are Mutually Exclusive

question 106

Multiple Choice

Projects A and B are mutually exclusive. Project A costs $20,000 and is expected to generate cash inflows of $7,500 for 4 years. Project B costs $10,000 and is expected to generate a single cash flow in year 4 of $20,000. The cost of capital is 12%. Which project would you accept and why?

• A) Project B because it has the higher NPV
• B) Project B because it has the higher IRR
• C) Project A because it has the higher NPV
• D) Project A because it has the higher IRR

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Definitions:

Complementary Characteristics

Traits or qualities that, when combined, enhance mutual effectiveness or value.

Opposites Attracting

The popular notion that individuals with differing personalities, interests, or physical traits are often drawn to each other, forming a complementary relationship.

Authoritarian Personalities

Personality traits characterized by strict adherence to authority and conformity, often at the expense of personal freedom.

Discrimination

Discrimination is the unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex.