You Are Considering Two Mutually Exclusive Projects with the Following

question 84

Multiple Choice

You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent?

• A)accept project A as it always has the higher NPV
• B)accept project B as it always has the higher NPV
• C)accept A at 8.5 percent and B at 13 percent
• D)accept B at 8.5 percent and A at 13 percent
• E)accept B at 8.5 percent and neither at 13 percent

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Definitions:

Elasticity

A measure of how much the quantity demanded or supplied of a good changes in response to a change in its price or other economic factors.

Demand

The desire of purchasers, consumers, or clients for a particular good or service, coupled with the ability and willingness to pay for it.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period.

Elastic

Describes a situation in which the supply or demand for a good or service significantly changes in response to price changes.