Under the Equivalent Annual Value Method,the Criterion for Project Acceptance

question 1

Multiple Choice

Under the equivalent annual value method,the criterion for project acceptance is:

• A)the project with the higher equivalent annual value is preferred.
• B)the project with the lower equivalent annual value is preferred.
• C)the project with the shorter life is preferred.
• D)the project with the higher equivalent annual value is preferred,provided that both projects have the same cost of capital.

---

Definitions:

Total Variable Costs

The sum of all costs that vary with output level, including costs for raw materials, labor, and other expenses that increase with production.

Output Increases

A situation in which the quantity of goods or services produced in an economy rises.

Production Technique

The method or process used by businesses to produce goods or services, which can vary in efficiency, cost, and quality.

Price of Labor

The wage rate or the amount of compensation workers receive in exchange for their labor.