When Comparing Two Projects with Different Lives,why Do You Compute

question 11

Multiple Choice

When comparing two projects with different lives,why do you compute an annuity with an equivalent present value (PV) to the net present value (NPV) ?

• A)so that you can see which project has the greatest net present value (NPV)
• B)so that the projects can be compared on their cost or value created per year
• C)to reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter time frame
• D)to ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are considered
• E)to avoid complications arising from alternating cash inflows and outflows

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Definitions:

Independent Variable

In an experiment, the variable that is manipulated or changed by the researcher to observe its effects on the dependent variable.

Extraneous Variable

Any variable that is not intentionally studied in the experiment, which can affect the outcome and potentially confound the results if not controlled.

Dependent Variable

The variable being tested and measured in a scientific experiment, expected to change as a result of alterations in the independent variable.

Plant Growth

The process by which plants increase in size and mass through both cell growth and cell division, influenced by environmental factors and genetic makeup.