Draw a Graph That Illustrates Two Mutually Exclusive Investments, a and B

question 302

Essay

Draw a graph that illustrates two mutually exclusive investments, A and B, with a crossover rate of
return equal to 10%, and with A having the higher NPV at a discount rate of zero percent. Explain
the graph, including under which conditions project A or project B would be chosen using NPV and
then using IRR.

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Definitions:

Billion

A numerical value represented as 1,000 million (1,000,000,000) in the short scale, commonly used in financial and demographic statistics.

MPS

The marginal propensity to save, which is the proportion of an additional unit of income that is saved rather than spent.

Induced Consumption

Consumer spending that increases as disposable income rises, and decreases as disposable income falls.

Trillion

Trillion is a numerical value represented as 1,000,000,000,000 (10^12), commonly used to quantify large figures such as government budgets, economics, and astronomy.