When Mutually Exclusive Projects Have Different Lives, the Project That

question 43

Multiple Choice

When mutually exclusive projects have different lives, the project that should be selected will have the:

• A) highest IRR.
• B) longest life.
• C) lowest equivalent annual cost.
• D)highest NPV, discounted at the opportunity cost of capital.

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Definitions:

Bid Price

The highest price that a buyer is willing to pay for a security or asset.

NPV

Net Present Value; the difference between the present value of cash inflows and outflows over a period, used in capital budgeting to assess the profitability of an investment.

Project

A coordinated agenda of tasks linked together, intended to be carried out over an established duration and within specified cost and limitations.

Corporate Tax Rate

The percentage of a corporation's income that is taken as tax by the government.