Two Mutually Exclusive Projects Have the Following Positive NPVs and Project

question 76

Multiple Choice

Two mutually exclusive projects have the following positive NPVs and project lives. $\begin{array} { r c c } \text { Project } & \text { NPV } & \text { Life } \\\text { Project A } & \$ 5,000 & \text { 3 years } \\\text { Project B } & \$ 6,500 & \text { 5 years }\end{array}$ If the cost of capital were 15 percent, which project would you accept?

• A)Project A, because it has higher EAC
• B)Project B, because it has higher EAC
• C)Project A, because its NPV can be earned more quickly
• D)Project B, because it has higher NPV

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Definitions:

Selling Season

The specific time period during which demand for a particular product or service is significantly higher, often due to seasonal factors.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for significant differentiation.

Differentiate

To distinguish a product, service, or brand from competitors by emphasizing unique features or benefits.

Cash Expenditure

The actual outflow of cash or cash equivalents by a company, typically for operating expenses, investments, or acquisitions.