Two Mutually Exclusive Projects Produce the Same Positive NPV at a Discount

question 74

Multiple Choice

Two mutually exclusive projects produce the same positive NPV at a discount rate of 11.34 percent.Both projects have 4-year lives.Project A has larger cash flows than Project B in the first 2 years.Given this information,you know that

• A)it makes no difference which project you accept as long as the discount rate does not exceed 11.34 percent.
• B)Project A should always be preferred.
• C)one project will be preferred at rates less than 11.34 percent and the other will be preferred at higher rates.
• D)Project B must require a smaller investment than Project A at Time 0.
• E)Project B should only be accepted if the discount rate is 11.34 percent.

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