You Are Considering Two Mutually Exclusive Projects with the Following $8 \%$

question 94

Multiple Choice

You are considering two mutually exclusive projects with the following cash flows. Will your choice between the two projects differ if the required rate of return is $8 \%$ rather than $11 \%$ ? If so, what should you do?

• A)yes; Select A at 8% and B at 11%.
• B)yes; Select B at 8% and A at 11%.
• C)yes; Select A at 8% and select neither at 11%.
• D)no; Regardless of the required rate, project A always has the higher NPV.
• E)no; Regardless of the required rate, project B always has the higher NPV.

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Definitions:

Indirect Expense

Costs that are not directly tied to a specific product or service but are necessary for the overall operation of a business, such as utilities or rent.

Rent

The cost incurred for using properties or equipment owned by another party for a specified period.

Direct Expense

Costs that can be directly tied to the production of specific goods or servicing of specific services, such as raw materials and labor.

Painting Department

The painting department is a specific section within a manufacturing or production company responsible for painting and finishing products.