Two Projects Being Considered Are Mutually Exclusive and Have the Following

question 27

Multiple Choice

Two projects being considered are mutually exclusive and have the following projected cash flows: At what rate (approximately) do the NPV profiles of Projects A and B cross?

• A) 6.5%
• B) 11.5%
• C) 16.5%
• D) 20.0%
• E) The NPV profiles of these two projects do not cross.

---

Definitions:

Net Asset Test

A financial assessment to determine a company's or individual's net worth by subtracting total liabilities from total assets.

Revised Act

Refers to legislation that has been updated or amended to incorporate changes or new provisions since its original enactment.

Earned Surplus

Profits that a company has retained rather than distributed to shareholders, typically used for reinvestment in the business or to pay down debt.

Undistributed Profits

Profits earned by a company that have not been paid out as dividends to shareholders and are retained for reinvestment.