When Mutually Exclusive Projects Have Different Lives, the Project Which

question 86

Multiple Choice

When mutually exclusive projects have different lives, the project which should be selected will have the:

• A)Highest IRR
• B)Longest life
• C)Lowest equivalent annual cost
• D)Highest NPV, discounted at the opportunity cost of capital

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Definitions:

Public Goods

Commodities or services that are provided without profit to all members of a society, either by the government or a private individual or organization.

External Costs

Costs incurred as a result of an economic activity that are not reflected in the market price, often shouldered by society or the environment.

Unemployment

A situation where individuals who are able and willing to work are not able to find employment.

Efficient Allocations

The optimal distribution of resources among competing uses to achieve the highest overall level of welfare or utility.