Matt Is Analyzing Two Mutually Exclusive Projects of Similar Size

question 414

Multiple Choice

Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data. Both projects have 5 year lives. Matt has been asked for his best recommendation given this information. His recommendation should be to accept:

• A) Project B because it has the shortest payback period.
• B) Both projects as they both have positive net present values.
• C) Project A and reject project B based on their net present values.
• D) Project B and reject project A based on their average accounting returns.
• E) Project B and reject project A based on both the payback period and the average accounting return.

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Definitions:

Surviving

The act of continuing to live or exist, especially in spite of difficult conditions or circumstances.

Disease X

Refers to a hypothetical, unknown pathogen that could cause a future epidemic.

Cumulative Probability

The probability of an event happening up to a certain point in time or over multiple steps.

Metastatic Cancer

A type of cancer that has spread from the primary site of origin to different parts of the body, leading to secondary malignant growths at distant sites.