Two Projects Being Considered Are Mutually Exclusive and Have the Following

question 27

Multiple Choice

Two projects being considered are mutually exclusive and have the following projected cash flows: $\begin{array}{lll}\underline{\text { Year} } & \underline{\text { Project A}}& \underline{\text { Project B }}\\0 & -\$ 50,000 & -\$ 50,000 \\1 & 15,990 & 0 \\2 & 15,990 & 0 \\3 & 15,990 & 0 \\4 & 15,990 & 0 \\5 & 15,990 & 100.560\end{array}$
At what rate (approximately) do the NPV profiles of Projects A and B cross?

• A)6.5%
• B)11.5%
• C)16.5%
• D)20.0%
• E)The NPV profiles of these two projects do not cross.

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Definitions:

Utility Function

A mathematical representation of how consumers rank different bundles of goods based on the satisfaction each bundle provides.

Indifference Curve

A representation of the consumer's preferences, illustrating different combinations of goods that provide the same level of utility or satisfaction.

Apples

Edible fruits from the apple tree, known for their sweet taste and crunchy texture, and used in a variety of culinary dishes.

Bananas

A type of fruit that is elongated, curved, and covered with a peel, typically yellow when ripe, and consumed as a sweet source of energy.