If WiseGuy Inc Is Choosing One of the Above Mutually

question 87

Multiple Choice

If WiseGuy Inc is choosing one of the above mutually exclusive projects (Project A or Project B) , given a discount rate of 7%, which should the company choose?

• A)Project A
• B)Project B
• C)Neither project - both have negative NPV.
• D)Both projects - both have positive NPV.

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Definitions:

Strip Bond

A debt security that has had its principal and coupon payments detached and sold separately as zero-coupon bonds.

Compounded Semi-Annually

Interest that is computed and added to the original amount every six months, resulting in compound interest.

Compounded Annually

A method where interest is added to the principal balance once a year, affecting the total interest earned or paid.

Compounded Monthly

A method of calculating interest where interest earned is added to the principal monthly, so each subsequent interest calculation is on an increased amount.