Project a Has an Initial Cost of $16,400 and Cash

question 15

Multiple Choice

Project A has an initial cost of $16,400 and cash flows of $5,100,$6,800,and $6,900 for Years 1 to 3,respectively.Project B has an initial cost of $21,200 and cash flows of $8,300,$7,900,and $7,700 for Years 1 to 3,respectively.What is the incremental IRR_B-A?

• A)2.89%
• B)4.07%
• C)5.91%
• D)6.75%
• E)7.90%

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Definitions:

F-test

A statistical test used to compare two variances and determine if they come from populations with equal variances.

Kruskal-Wallis Test

A nonparametric method for testing whether samples originate from the same distribution, used when the assumption of normality in ANOVA is violated.

P-value

The probability of observing test results at least as extreme as the results actually observed, under the assumption that the null hypothesis is true.

Test Statistic

A value calculated from sample data during a hypothesis test to decide whether to reject the null hypothesis.