Assume You Use All Available Methods to Evaluate Projects

question 11

Multiple Choice

Assume you use all available methods to evaluate projects.If there is a conflict in the indicated accept/reject decision between two mutually exclusive projects due to the IRR-based indicator,you should:

• A)accept both projects if both are acceptable according to NPV.
• B)combine both projects into one larger project.
• C)ignore the IRR and rely on the decision indicated by the NPV method.
• D)base the final decision on the payback method.
• E)reject both projects due to ambiguity in the decision-making process.

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Definitions:

Transfer Price

The price charged one decentralized unit by another for the goods or services provided.

Transfer Pricing

The pricing of goods, services, and intangibles between related legal entities within an enterprise to optimize tax liabilities and profit allocation.

Division Manager

An individual responsible for overseeing a specific division within a company, ensuring its operational and financial performance.

Residual Income

Income that remains after deducting all costs, including the cost of capital, from business or investment earnings.