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

question 118

Multiple Choice

A company is considering two mutually exclusive projects, A and B. Project A requires an initial investment of $200, followed by cash flows of $185, $40 and $15. Project B requires an initial investment of $200, followed by cash flows of $0, $50 and $230. What is the IRR of the project that is best for the company's shareholders? The firm's cost of capital is 10%.

• A) 15.45%
• B) 15.12%
• C) 13.57%
• D) 12.71%

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Definitions:

Percussion Note

The sound produced through tapping on the body’s surface, often used in medical examinations to assess the condition of the underlying tissues or organs.

Increased Density

Refers to a condition where tissues or materials in the body or an object exhibit greater compactness which may indicate changes or abnormalities under diagnostic imaging.

Lung Tissue

The biological material that makes up the lungs, responsible for the exchange of oxygen and carbon dioxide in the body.

Diaphragm of Stethoscope

The diaphragm of a stethoscope is the flat, disc-shaped part used to listen to higher frequency sounds in the body, such as breath, bowel, and heart sounds.