The Final Decision on Which One of Two Mutually Exclusive

question 45

Multiple Choice

The final decision on which one of two mutually exclusive projects to accept ultimately depends upon which one of the following?

• A)initial cost of each project
• B)timing of the cash inflows
• C)total cash inflows of each project
• D)required rate of return
• E)length of each project's life

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Definitions:

Risky Asset

An asset that carries a significant degree of risk of losing all or part of its value.

Total Risk

The complete spectrum of risks associated with an investment, including both systematic and unsystematic risks.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, widely used in statistics to quantify the uncertainty or risk.

Diversifiable Risk

A type of risk that can be reduced or eliminated from a portfolio through the process of diversification, as it's not correlated to market risk.