You Are Going to Choose Between Two Investments

question 51

Multiple Choice

You are going to choose between two investments. Both cost $80,000, but investment A pays $35,000 a year for four years while investment B pays $30,000 a year for five years. If your
Required return is 13%, which should you choose?

• A) A, because the pays back sooner.
• B) A, because the IRR exceeds 13%.
• C) A, because the project has a higher IRR.
• D) B, because the IRR exceeds 13%.
• E) B, because it has a higher NPV.

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Definitions:

Manufacturing Defect

Refers to a flaw or imperfection in a product that occurs during its production, potentially making it unsafe or unusable.

"Reasonable"

A term used to denote actions or decisions that are logically sound, based on fair judgment and common sense.

Quality Control

The process of ensuring products and services meet customer expectations and regulatory requirements through consistent monitoring and testing.

Due Care

A standard of diligence that a reasonable person exercises to avoid harm to other persons or their property.