Sexton Inc

question 53

Multiple Choice

Sexton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV, so no value will be lost if the IRR method is used.

• A) $134.79
• B) $141.89
• C) $149.36
• D) $164.29
• E) $205.36

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Definitions:

Rich Countries

Nations with high gross domestic product (GDP) per capita, indicating a high level of economic prosperity and standard of living.

Colonialism

The policy or practice of acquiring full or partial political control over another country, occupying it with settlers, and exploiting it economically.

Economic Growth

The increase in the production of goods and services in an economy over time, usually measured by the rise in Gross Domestic Product (GDP).

Dependency Theory

A theory suggesting that economic disparities between countries are the result of the exploitation of poorer countries by wealthier ones, leading to a state of dependency.