Two Projects Being Considered Are Mutually Exclusive and Have the Following

question 42

Multiple Choice

Two projects being considered are mutually exclusive and have the following projected cash flows: If the required rate of return on these projects is 10 percent,which would be chosen and why?

• A) Project B because of higher NPV.
• B) Project B because of higher IRR.
• C) Project A because of higher NPV.
• D) Project A because of higher IRR.
• E) Neither,because both have IRRs less than the required return.

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Definitions:

Current Asset

An asset that is expected to be converted into cash, sold, or consumed within one year or within the operating cycle of the business, whichever is longer.