Consider the Following Two Projects: Assume That Projects a and B

question 103

Multiple Choice

Consider the following two projects: Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to ________.

• A)invest in project A, since NPV_B < NPV_A
• B)invest in project B, since IRR_B > IRR_A
• C)invest in project B, since NPV_B > NPV_A
• D)invest in project A, since NPV_A > 0

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Definitions:

Underpricing

Occurs when the initial offering price of a stock is set below its market value, often leading to a price surge once it begins trading publicly.

Direct Issuance Costs

Expenses directly associated with the issuance of new securities, including legal, accounting, and underwriting fees.

Secondary Equity Offering

A financial transaction where a company offers additional shares for sale to the public after an initial public offering.