Consider the Following Two Mutually Exclusive Projects: Whichever Project

question 50

Multiple Choice

Consider the following two mutually exclusive projects: Whichever project you choose,if any,you require a 14 percent return on your investment.If you apply the payback criterion,you will choose Project ______; if you apply the NPV criterion,you will choose Project ______; if you apply the IRR criterion,you will choose Project _____; if you choose the profitability index criterion,you will choose Project ___.Based on your first four answers,which project will you finally choose?

• A)A; B; A; A; B
• B)A; A; B; B; A
• C)A; A; B; B; B
• D)B; A; B; A; A
• E)B; A; B; B; A

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Definitions:

Par

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

Stockholders' Equity

The ownership stake of shareholders in a corporation's assets, remaining after all liabilities have been subtracted.

Paid-in Capital

Funds raised by a company through the issuance of shares to investors, exceeding the par value of the shares.

Par Value

The nominal or face value of a bond, stock, or coupon as indicated on a certificate or bond itself, often used as a legal capital measurement.