You Are Considering the Following Two Mutually Exclusive Projects

question 18

Multiple Choice

You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value.
Based upon the payback period and the information provided in the problem, you should:

• A) Accept both project A and project B.
• B) Reject both project A and project B.
• C) Accept project A and reject project B.
• D) Accept project B and reject project A.
• E) Require that management extend the payback period for project A since it has a higher initial cost.

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Definitions:

Units

Basic quantitative measures used in economics and commerce to count, describe, and measure the amount of a product or commodity.

Least-Cost Combination

is an economic principle that firms achieve by using the mix of inputs that minimize their costs while producing a given level of output.

MRP

Marginal Revenue Product; the additional revenue generated by employing one more unit of a resource or factor of production.

Resources

Assets, materials, and inputs needed for the production of goods and services, including natural resources, labor, and capital.