You Have a Choice Between Two Mutually Exclusive Investments

question 101

Multiple Choice

You have a choice between two mutually exclusive investments. If you require a 14% return, which investment should you choose?

• A) Project B, because it has a smaller initial investment.
• B) Project A, because it has a higher NPV.
• C) Either one, because they have the same profitability indexes.
• D) Project B, because it has the higher internal rate of return.
• E) Project B, because it pays back faster.

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Definitions:

Securities

Tradable assets indicating an equity stake in a company available on the public market, a lending relationship with either a governmental agency or a corporation (bond), or the rights to own shares as depicted by an option.