Which Mutually Exclusive Project Would You Select,if Both Are Priced

question 76

Multiple Choice

Which mutually exclusive project would you select,if both are priced at $1,000 and your required return is 15%: Project A with three annual cash flows of $1,000; or Project B,with 3 years of zero cash flow followed by 3 years of $1,500 annually?

• A) Project A
• B) Project B
• C) You are indifferent since the NPVs are equal.
• D) Neither project should be selected.

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Definitions:

FOB Destination

A shipping term indicating the seller bears freight charges and retains ownership until goods are delivered to the buyer.

Freight Costs

Expenses associated with transporting goods from one place to another.

September

Refers to the ninth month of the year in the Gregorian calendar.

Inventory Cost

The total cost associated with buying or producing goods, including purchase price, materials, labor, and overhead, until they are sold.