Table 11.11 Yong Importers,an Asian Import Company,is Evaluating Two Mutually Exclusive Projects,A

question 49

Multiple Choice

Table 11.11
Yong Importers,an Asian import company,is evaluating two mutually exclusive projects,A and B.The relevant cash flows for each project are given in the table below.The cost of capital for use in evaluating each of these equally risky projects is 10 percent.
-Which project should be chosen using the Annualized NPV approach? (See Table 11.11)

• A)Project A because its annualized NPV is higher
• B)Project B because its NPV is higher
• C)Project A because its IRR is higher
• D)Project B because its annualized NPV is higher

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Definitions:

Price Elastic Demand

Describes a situation where the quantity demanded of a good or service significantly changes in response to a change in its price.

Close Substitutes

Goods or services that can serve as replacements for each other with little loss of utility to the consumer.

OPEC Oil Cartel

An international organization of oil-producing countries that coordinates and unifies the petroleum policies of its member states to stabilize oil markets and prices.

Inelastic

Describing demand that does not significantly change with the price changes of a good or service.