You Are Considering the Following Two Mutually Exclusive Projects

question 39

Multiple Choice

You are considering the following two mutually exclusive projects. Both projects will be depreciated using straight-line depreciation to a zero book value over the life of the project. Neither project has any salvage value. Required rate of return 10% 13%
Required payback period 2.0 years 2.0 years
Based on the net present value method of analysis and given the information in the problem,you should:

• A) accept both project A and project B.
• B) accept project A and reject project B.
• C) accept project B and reject project A.
• D) reject both project A and project B.
• E) accept whichever one you want as they represent equal opportunities.

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Definitions:

Diathesis-Stress Model

A psychological theory that explains behavior as both a result of biological and genetic factors ("diathesis") and life experiences ("stress").

Conversion Disorder

A mental condition in which a person shows psychological stress in physical ways without a medical cause, previously known as hysteria.

Medical Reason

Justifiable cause based on health or physical condition that explains a particular decision, action, or outcome in a medical context.

Paranoid Personality Disorder

A personality disorder characterized by persistent suspiciousness but not involving the disorganization of paranoid schizophrenia.