HH Companies Has Identified Two Mutually Exclusive Projects

question 57

Multiple Choice

HH Companies has identified two mutually exclusive projects. Project A has cash flows of -$40,000, $21,200, $16,800, and $14,000 for Years 0 to 3, respectively. Project B has a cost of $38,000 and annual cash inflows of $25,500 for 2 years. At what rate would you be indifferent between these two projects?

• A) 6.34 percent
• B) −1.72 percent
• C) 9.41 percent
• D) −4.38 percent
• E) 8.28 percent 

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Definitions:

GDP

Gross Domestic Product quantifies the overall market worth of every completed good and service produced internally across a country during a certain period.

National Income

The total income earned by a country's factors of production within a given period, representing the sum of wages, rent, interest, and profits.

Depreciation

The reduction in the value of an asset over time, typically due to wear and tear, usage, or aging.

GDP

Gross Domestic Product, the total value of all goods and services produced within a country over a specified period, typically a year.