You Are Considering Two Independent Projects with the Following Cash

question 61

Multiple Choice

You are considering two independent projects with the following cash flows. The required return for both projects is 10%. Given this information,which one of the following statements is correct?

• A) You should accept project B since it has the higher IRR and reject project A because you can not accept both projects.
• B) You should accept project A because it has the lower NPV and reject project B.
• C) You should accept project A because it has the higher NPV and you can not accept both projects.
• D) You should accept project B because it has the higher IRR and reject project A.
• E) You should accept both projects if the funds are available to do so since both NPV's are > 0.

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Definitions:

Kilograms

A unit of mass in the metric system, equivalent to 1,000 grams, used globally for measuring weight.

Per Hour

A rate or measurement that denotes something occurring or calculated over the course of an hour.

Material Variance

The difference between the actual cost of materials used in production and the standard cost expected.

Favourable Variances

Differences between actual and budgeted performance that result in better than expected financial outcomes.