The Winston Co A)1394%; a
B)13

question 21

Multiple Choice

The Winston Co.is considering two mutually exclusive projects with the following cash flows.The incremental IRR is _____ and if the required rate is higher than the crossover rate then project _____ should be accepted. $\begin{array}{cll}\underline{\text { Year }} & \begin{array}{l}\text { Project A } \\\underline{\text { Cash Flow }}\end{array} & \begin{array}{l}\text { Project B } \\\underline{\text { Cash Flow }}\end{array} \\ 0 &-\$75,000 &-\$60,000\\1 & \$30,000 & \$ 25,000 \\2 & \$ 35,000 & \$ 30,000 \\3 & \$35,000 & \$ 25,000\end{array}$

• A)13.94%; A
• B)13.94%; B
• C)15.44%; A
• D)15.44%; B
• E)15.86%; A

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Definitions:

Normal Good

A good for which demand increases as the income of consumers increases.

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, and vice versa.

Optimal Consumption

The combination of goods and services that provides the highest level of satisfaction to an individual, given their income and the prices of those goods and services.

Prices Constant

An assumption in economic analysis that prices remain unchanged over a specific period, allowing for the examination of other variables' effects without price fluctuations.