Which Mutually Exclusive Project Would You Select,if Both Are Priced

question 76

Multiple Choice

Which mutually exclusive project would you select,if both are priced at $1,000 and your required return is 15%: Project A with three annual cash flows of $1,000; or Project B,with 3 years of zero cash flow followed by 3 years of $1,500 annually?

• A) Project A
• B) Project B
• C) You are indifferent since the NPVs are equal.
• D) Neither project should be selected.

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Definitions:

One Hundredth

A fractional unit that is one part of a hundred, commonly expressed as 1/100.

Hydro-

A prefix indicating relation to water.

Hydrotherapy

The use of water in the treatment of different conditions, including arthritis and related rheumatic complaints.

Water

A colorless, odorless, tasteless liquid that forms the seas, lakes, rivers, and rain, and is the basis of the fluids of living organisms.