When Graphing NPV at Different Discount Rates for Mutually Exclusive

question 18

Multiple Choice

When graphing NPV at different discount rates for mutually exclusive projects,the project with the lower IRR should be selected whenever:

• A) the rate corresponding to the crossover NPV exceeds the opportunity cost of capital.
• B) the rate corresponding to the crossover NPV is less than the opportunity cost of capital.
• C) that IRR exceeds the opportunity cost of capital.
• D)the NPV is negative when discounted at the IRR.

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Definitions:

Ending Inventory

Refers to the value of goods available for sale at the end of an accounting period.

Tennis Rackets

Sporting equipment consisting of a handled frame with an open hoop across which a network of strings or catgut is stretched tightly, used to strike a tennis ball.

Inventory Turnover

A measure of how many times inventory is sold or used in a time period such as a year.

Net Sales

The revenue generated from goods or services sold by a company after deducting returns, allowances for damaged or missing goods, and discounts.