You Are Considering Two Independent Projects with the Following Cash

question 114

Multiple Choice

You are considering two independent projects with the following cash flows.The required return for both projects is 16 percent.Given this information,which one of the following statements is correct?

• A)You should accept Project A and reject Project B based on their respective NPVs.
• B)You should accept Project B and reject Project A based on their respective NPVs.
• C)You should accept Project A and reject Project B based on their respective IRRs.
• D)You should accept Project B and reject Project A based on their respective IRRs.
• E)You should accept both projects based on both the NPV and IRR decision rules.

---

Definitions:

Economic Analysis

The systematic approach to determining the optimum use of scarce resources, involving comparison of two or more alternatives in achieving a specific objective under the given assumptions and constraints.

Marginal Benefit

The additional benefit obtained from consuming one more unit of a product or service.

Marginal Benefit

The additional benefit received from consuming one more unit of a product or service.

Total Benefit

The overall advantages or gains received from a good or service, including both tangible and intangible elements.