You Know That Two Mutually Exclusive Projects Are of Different

question 55

Multiple Choice

You know that two mutually exclusive projects are of different sizes.The smaller project is known to have a positive NPV.Which one of these accurately describes a method of properly determining which one,if either,project should be accepted?

• A)Select the project with the higher internal rate of return
• B)Accept the project with the shorter payback period
• C)Accept the larger project if the incremental IRR exceeds the discount rate
• D)Select the project with the higher profitability index
• E)Accept the smaller project without any further analysis

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Definitions:

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of potential investments based on cash flows.

Project Accepted

A status indicating that a proposed plan or project has been reviewed and granted approval for implementation.

Profitability Indices

Profitability indices are financial tools used to evaluate the efficiency of an investment or to compare the efficiency of multiple projects by calculating the ratio of the present value of future cash flows to the initial investment.

Project Accepted

The status of a project that has been approved for execution after evaluation of its feasibility, returns, and alignment with strategic goals.