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).

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Definitions:

Predominant Surface

The surface area of an object that is most prevalent or has the largest extent, often having significant functional or aesthetic implications.

Waviness

A form of surface irregularity characterized by wave-like undulations, which is considered when assessing surface texture and quality.

Roughness

Refers to the texture of a surface and is quantified by the deviations in the direction of the normal vector of a real surface from its ideal form.

Micrometer

A micrometer is a precision measuring instrument that can measure extremely small distances, thicknesses, or diameters, often used in machining and mechanical engineering.