Tara Is Evaluating Two Mutually Exclusive Capital Budgeting Projects That

question 52

Multiple Choice

Tara is evaluating two mutually exclusive capital budgeting projects that have the following characteristics: If the firm's required rate of return (r) is 10 percent,which project should be purchased?

• A) Both projects should be purchased,because the IRRs for both projects exceed the firm's required rate of return.
• B) Neither project should be accepted,because the IRRs for both projects exceed the firm's required rate of return.
• C) Project Q should be accepted,because its net present value (NP
• V)is higher than Project R's NPV.
• D) Project R should be accepted,because its net present value (NP
• V)is higher than Project Q's NPV.
• E) None of the above is a correct answer.

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