In the Case of Mutually Exclusive Projects

question 50

Multiple Choice

In the case of mutually exclusive projects:

• A)the financial manager is responsible for choosing the average of these alternatives since only one can be chosen; selecting one project requires the selection of the other.
• B)they are to be evaluated based on their expected effect on shareholder wealth; all suchthe projects that enhances shareholder wealth the most should be included in the firm's capital budget.
• C)the financial manager is responsible for choosing the top three of these alternatives since only three can be chosen.
• D)they are to be evaluated based on their past effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget.
• E)none of the above statements are correct

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Definitions:

Attribution Theory

The theory of how people make attributions.

Primacy Effect

Tendency to remember information at the beginning of a body of information better than the information that follows.

Cognitive Dissonance

A psychological theory that suggests discomfort arises when a person holds conflicting beliefs, attitudes, or values, often leading to changes in one of the beliefs or behaviors.

Primacy Effect

The tendency to remember information at the beginning of a list better than the information that follows.