Consider the Following Projects, X and Y, Where the Firm

question 43

Multiple Choice

Consider the following projects, X and Y, where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respectively. Which investment should the firm choose if the cost of capital is 10 percent?

• A) Project X, since it has a higher NPV than Project Y
• B) Project Y, since it has a higher NPV than Project X
• C) Project X, since it has a lower NPV than Project Y
• D) Project Y, since it has a lower NPV than Project X

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Definitions:

Accuracy of Polygraphs

The degree to which polygraph tests can reliably and validly detect deception, often debated in terms of effectiveness.

Seat of Emotions

A metaphorical term that refers to the brain regions responsible for the generation and regulation of emotions, typically involving the limbic system.

Amygdala

A region in the brain involved in processing emotions, particularly fear and aggression, and forming emotional memories.

Medulla

A section of the brainstem responsible for regulating vital body functions, such as breathing and heart rate.