You Are Considering the Following Two Mutually Exclusive Projects

question 53

Multiple Choice

You are considering the following two mutually exclusive projects. The crossover point is _____ and Project _____ should be accepted if the discount rate is 14 percent.

• A) 12.79 percent; B
• B) 13.28 percent; A
• C) 13.28 percent; B
• D) 15.96 percent; A
• E) 15.96 percent; B

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Definitions:

Efficiency Loss

Reductions in combined consumer and producer surplus caused by an underallocation or overallocation of resources to the production of a good or service. Also called deadweight loss.

Perfectly Inelastic

A situation where the demand or supply for a good or service remains unchanged regardless of changes in its price.

Excise Tax

Is a tax applied on the sale or production for sale of specific goods within a country.

Incidence

Refers to how the burden of a tax is distributed between buyers and sellers in the market.