Dealing with Mutually Exclusive Projects, We Start with Some Current

question 6

Multiple Choice

Dealing with mutually exclusive projects, we start with some current alternative. How do we chose it?

• A)the alternative with the highest internal rate of return
• B)the alternative with a zero net benefit
• C)the alternative with the benefit-cost ratio of one
• D)the "do nothing" alternative
• E)the alternative with the smallest first cost

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Definitions:

Yield-to-Maturity

The total anticipated return on a bond if held until it matures, accounting for its current market price, face value, interest payments, and time to maturity.

Marginal Tax Rate

The rate at which the next dollar of taxable income will be taxed.

WACC

Weighted Average Cost of Capital; a calculation of a company's capital cost that weighs each category of capital proportionately.

Marginal Tax Rate

The marginal tax rate is the rate of tax applied to the next dollar of taxable income, indicating the percentage of tax an individual or corporation pays on an additional dollar of income.