Matt Is Analyzing Two Mutually Exclusive Projects of Similar Size

question 44

Multiple Choice

Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data.Both projects have 5 year lives. $\begin{array}{|l|l|l|}\hline -& \text { Project } \mathrm{A} & \text { Project } \mathrm{B} \\\hline \text { Net present value } & £ 15,090 & £ 14,693 \\\hline \text { Payback period } & 2.76 \text { years } & 2.51 \text { years } \\\hline \text { Average accounting return } & 9.3 \% & 9.6 \% \\\hline \text { Required return } & 8.3 \% & 8.0 \% \\\hline \text { Required AAR } & 9.0 \% & 9.0 \% \\\hline\end{array}$ Matt has been asked for his best recommendation given this information.His recommendation should be to accept:

• A)project B because it has the shortest payback period.
• B)both projects as they both have positive net present values.
• C)project A and reject project B based on their net present values.
• D)project B and reject project A based on their average accounting returns.
• E)project B and reject project A based on both the payback period and the average accounting return.

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Definitions:

Ethnicity

A categorization of people based on shared cultural, linguistic, or ancestral traits.

Sexual Orientation

An inherent or immutable enduring emotional, romantic, or sexual attraction to other people.

Job Migration

The movement of workers from one sector, region, or country to another, often in pursuit of better employment opportunities and working conditions.

Ecological Fallacy

The error that arises when conclusions about individual-level behavior are drawn from aggregate-level data, assuming that group data reflect the individual behaviors within the group.