The Final Decision on Which One of Two Mutually Exclusive

question 45

Multiple Choice

The final decision on which one of two mutually exclusive projects to accept ultimately depends upon which one of the following?

• A)initial cost of each project
• B)timing of the cash inflows
• C)total cash inflows of each project
• D)required rate of return
• E)length of each project's life

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Definitions:

Financial Lease

A type of lease in which the lessee has use of the asset for a significant part of its useful life, offering benefits similar to ownership.

Lessor

An entity that rents out an asset or property to another party, known as the lessee.

Incremental Annual Cash Flow

Incremental Annual Cash Flow is the additional cash flow an enterprise generates from taking on a new project or investment, over its existing cash flow.

MACRS Depreciation

A method of depreciation used for tax purposes in the United States which allows businesses to recover their investments in certain property over a specified life.