When Comparing Two Projects with Different Lives, Why Do You

question 78

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 ensure that cash flows from the project with a longer life that occur after the project with the shorter life has ended are considered.
• D)To reduce the danger that changes in the estimate of the discount rate will lead to choosing the project with a shorter timeframe.

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Definitions:

Sensation

The process and perception of detecting stimuli from the environment through sensory organs and translating it to the brain.

Movement

The act or process of changing position or place, facilitated by the muscular system and the nervous system.

Perineurium

Connective tissue sheath surrounding a nerve fascicle.

Fascicles

Bundles of muscle or nerve fibers encased in connective tissue, contributing to the structure and function of muscles and nerves.