You Are Trying to Determine Whether to Accept Project a or Project

question 45

Multiple Choice

You are trying to determine whether to accept project A or project B.These projects are mutually exclusive.As part of your analysis,you should compute the incremental IRR by determining:

• A)the discount rate that equates the discounted payback periods for each project.
• B)the net present value of each project using the internal rate of return as the discount rate.
• C)the internal rate of return for the cash flows of each project.
• D)the internal rate of return for the differences in the cash flows of the two projects.
• E)the discount rate that makes the net present value of each project equal to 1.

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Definitions:

Retained Earnings

Cumulative net earnings not distributed as dividends to shareholders, reinvested in the business or available for debt repayment.

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a certificate or instrument.

Dividend Rate

The amount of dividend paid per share divided by the price per share, often expressed as a percentage, indicating the returns shareholders receive for each dollar invested in the company's stock.