For Mutually Exclusive Projects,the Internal Rate of Return and the Net

question 24

Multiple Choice

For mutually exclusive projects,the internal rate of return and the net present value give consistent accept/reject decisions if:

• A)the net present value profiles for both projects do not intersect.
• B)the required rate of return is less than the discount rate,which causes the net present value profiles of the two projects to intersect.
• C)the investment projects have equal lives.
• D)the investment projects have identical cash flows in the final year.

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Definitions:

Direct Materials

Raw materials that can be directly traced to and are integral to the finished product.

Raw Materials

Basic substances in their natural, modified, or semi-processed states used as inputs for production.

Predetermined Overhead

An estimated rate used to assign overhead costs to products or services based on a planned amount of overhead and a planned allocation base.

Direct Labor

Workers who are directly involved in the manufacturing of goods or provision of services, whose labor costs are directly attributed to the product or service.