A Company Is Considering Two Mutually Exclusive Projects, a and B

question 111

Multiple Choice

A company is considering two mutually exclusive projects, A and B. Project A requires an initial investment of $100, followed by cash flows of $95, $20, and $5. Project B requires an initial investment of $100, followed by cash flows of $0, $20, and $130. What is the IRR of the project that is best for the company's shareholders? The firm's cost of capital is 10 percent.

• A) 15.24 percent
• B) 15.96 percent
• C) 16.17 percent
• D) 15.42 percent

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Definitions:

Psychoanalysis

A therapeutic approach founded by Sigmund Freud that interprets and treats psychological disorders through exploring unconscious desires and conflicts.

Biofeedback Training

A technique that teaches individuals to control physiological functions, such as heart rate or blood pressure, through monitoring and feedback.

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A condition where psychological stress adversely affects physiological functioning, leading to physical health problems.

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An individual's characteristic patterns of thought, emotion, and behavior, together forming their unique personality.