Consider Two Mutually Exclusive Projects a & B

question 9

Multiple Choice

Consider two mutually exclusive projects A & B.If you subtract the cash flows of opportunity B from the cash flows of opportunity A,then you should:

• A)take opportunity A if the regular IRR exceeds the cost of capital.
• B)take opportunity A if the incremental IRR exceeds the cost of capital.
• C)take opportunity B if the regular IRR exceeds the cost of capital.
• D)take opportunity B if the incremental IRR exceeds the cost of capital.

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Definitions:

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Failure to disclose important information that results in presenting a misleading picture of the facts.

Penalties

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Inflation-adjusted Amount

A monetary value converted to reflect changes in purchasing power due to inflation, ensuring comparison over time is more accurate.

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A set of documents, including financial statements and a prospectus, filed with a securities regulatory body to register new securities for public sale.