You Are Trying to Determine Whether to Accept Project a or Project

question 66

Multiple Choice

You are trying to determine whether to accept project A or project B.These projects are mutually exclusive.As part of your analysis, you should compute the incremental IRR by determining:

• A)the internal rate of return for the cash flows of each project.
• B)the net present value of each project using the internal rate of return as the discount rate.
• C)the discount rate that equates the discounted payback periods for each project.
• D)the discount rate that makes the net present value of each project equal to 1.
• E)the internal rate of return for the differences in the cash flows of the two projects.

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Definitions:

Dividends

Money given by a business to its owners, often sourced from the firm's profits.

Financing Activities

Cash flow activities related to raising capital and repaying shareholders, including issuing debt, selling equity, dividends, and repaying debt.

Guaranteed Annual Dividend

A promise by a corporation to pay its shareholders a specified minimum annual dividend.