You Have a Choice Between Two Mutually Exclusive Investments

question 229

Multiple Choice

You have a choice between two mutually exclusive investments. If you require a 14% return, which investment should you choose?

• A) Project B, because it has a smaller initial investment.
• B) Project A, because it has a higher NPV.
• C) Either one, because they have the same profitability indexes.
• D) Project B, because it has the higher internal rate of return.
• E) Project B, because it pays back faster.

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Definitions:

Holding Costs

The expenses associated with storing inventory before it is sold, including warehousing, insurance, depreciation, and opportunity costs.

Ordering Cost

The expenses borne by a company when ordering goods from suppliers, which may include costs associated with processing and receiving the order.

Service Level Policy

A set of guidelines or standards that determine the quality and performance level of customer service operations.

Standard Deviation

A measure of the dispersion or variance in a set of values, indicating how much the values deviate from the mean.