A Company Is Considering Two Mutually Exclusive Projects, a and B

question 3

Multiple Choice

A company is considering two mutually exclusive projects, A and B. Project A requires an initial investment of $100, followed by cash flows of $95, $20 and $5. Project B requires an initial investment of $100, followed by cash flows of $0, $20 and $130. What is the IRR of the project that is best for the company's shareholders? The firm's cost of capital is 10%.

• A) 15.24%
• B) 15.96%
• C) 16.17%
• D) 15.42%

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Definitions:

Emotional Response

A reaction characterized by strong feelings, such as joy, anger, or fear, triggered by stimuli or events.

Facial Expressions

Non-verbal cues expressed through the face that communicate emotions, reactions, or intentions.

FMRI Scans

Functional Magnetic Resonance Imaging, a neuroimaging procedure that measures and maps brain activity by detecting changes in blood flow.

Neuromarketing Method

An approach in marketing research that uses neuroscience technologies to study the brain's responses to marketing stimuli, aiming to understand consumer behavior.