When Ranking Two Mutually Exclusive Investments with Different Initial Amounts

question 101

Multiple Choice

When ranking two mutually exclusive investments with different initial amounts but approximately the same useful life, and assuming no capital rationing, management should give priority to the project:

• A) That generates cash flows for the longer period of time.
• B) Whose net after-tax cash flows equal the initial investment outlay.
• C) That has the greater accounting rate of return (ARR).
• D) Whose cash flows vary the least.
• E) That has the higher net present value (NPV).

---

Definitions:

Everyday Speech

The casual, informal language used by people in daily conversations.

Singular Propositions

A type of proposition concerning exactly one particular subject.

Distributed

In logic, referring to a term in a categorical proposition that applies to all members of the denoted class.

Distributed

Refers to a system or process that is spread out across multiple locations or among various entities.