Which of the Following Criteria Should Be Used to Choose

question 39

Multiple Choice

Which of the following criteria should be used to choose a project if there is a conflict between two mutually exclusive projects?

• A) The project whose internal rate of return is higher than its modified internal rate of return should be chosen.
• B) The project whose internal rate of return is equal to the expected rate of return should be chosen.
• C) The project with a higher net present value (NPV) should be chosen.
• D) The project whose payback period is equal to the expected years required to recover the original investment should be chosen.
• E) The project whose discounted payback period is longer than its traditional payback period should be chosen.

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Definitions:

Inelastic

Characterizes a condition in which the demand for a good or service is relatively unresponsive to changes in its price.

Elasticity of the Demand

A measure of how the quantity demanded of a good responds to a change in its price.

Technological Changes

Innovations or improvements in technology that enhance productivity, efficiency, or quality in the production of goods and services.

Monopoly Power

The exclusive control or possession of the supply or trade in a commodity or service, often eliminating competition.