Suppose Your Firm Is Considering Two Mutually Exclusive,required Projects with the Cash

question 114

Multiple Choice

Suppose your firm is considering two mutually exclusive,required projects with the cash flows shown as follows.The required rate of return on projects of both of their risk class is 10 percent,and the maximum allowable payback and discounted payback statistic for the projects are two and a half and three and a half years,respectively. Use the IRR decision rule to evaluate these projects; which one(s) should be accepted or rejected?

• A) Accept both A and B
• B) Accept neither A nor B
• C) Accept A, reject B
• D) Reject A, accept B

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Definitions:

Inflation Rates

The rate at which the general level of prices for goods and services is rising, indicating the purchasing power of currency is falling.

Mean Absolute Deviation

A statistical measure of the average absolute deviations from a dataset's mean, indicating variability within the data.

Actual Sales

The real or recorded number of sales transactions completed within a given period.

Forecasts

Predictions about future conditions or occurrences, often based on analysis of trends and data.