Mercury Metals Has Up to $100 Million Budgeted to Purchase

question 41

Multiple Choice

Mercury Metals has up to $100 million budgeted to purchase high efficiency smelters. The company has an 12% hurdle rate. A part of a smelter cannot be purchased. If Smelter A will cost $55 million and provide an expected income before depreciation of $16 million for each of 20 years and Smelter B will cost $90 million and provide an expected income before depreciation of $22 million in each of 20 years, which is the project Mercury Metals should undertake?

• A) Project A with the higher profitability index at 2.2.
• B) Project B has the higher profitability index at 1.8.
• C) Project A has the higher NPV at $64.5 million.
• D) Project A has the higher IRR at 29%.
• E) Project B with the higher NPV at $74.3 million.

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Definitions:

Psychoanalytic Manoeuvre

A technique used in psychoanalysis to explore the unconscious motives behind one’s behaviors and thoughts.

Repression

A defense mechanism identified in psychoanalytic theory where unpleasant thoughts, memories, or desires are unconsciously pushed from conscious thought.

Psychodynamic Theories

A collection of psychological theories that highlight the impact of unconscious thoughts and early life experiences on one's actions.

Lack of Testability

A characteristic of theories or hypotheses that cannot be empirically tested or examined through experimental methods to determine their validity.