You Are Considering Two Independent Projects with the Following Cash

question 78

Multiple Choice

You are considering two independent projects with the following cash flows.The required return for both projects is 10%.Given this information, which one of the following statements is correct? $\begin{array}{lll}\underline{\text { Year} } & \underline{\text { Project A }} &\underline{ \text { Project B }} \\ 0 & -\$ 950,000 & -\$ 125,000 \\1 & \$ 330,000 & \$ 55,000 \\2 & \$ 400,000 & \$ 50,000 \\3 & \$ 450,000 & \$ 50,000\end{array}$

• A)You should accept project B since it has the higher IRR and reject project A because you can not accept both projects.
• B)You should accept project A because it has the lower NPV and reject project B.
• C)You should accept project A because it has the higher NPV and you can not accept both projects.
• D)You should accept project B because it has the higher IRR and reject project A.
• E)You should accept both projects if the funds are available to do so since both NPV's are > 0.

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Definitions:

Harsh Advice

Guidance or recommendations that are blunt and may be perceived as unkind but are often intended to be helpful.

Self-Actualize

To self-actualize is to realize or achieve one's full potential, marked by the fulfillment of personal talents, capabilities, and self-awareness.

Fully Functioning Person

Describes an individual who is living in alignment with their true self, experiencing personal growth and self-actualization.

Personal Constructs

Psychological constructs according to George Kelly's theory, used by individuals to interpret and predict events.