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Consider the Following Two Projects: Assume That Projects a and B

question 116

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Consider the following two projects: Consider the following two projects:   Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to ________. A)  invest in project A, since NPV<sub>B</sub> < NPV<sub>A</sub> B)  invest in project B, since IRR<sub>B</sub> > IRR<sub>A</sub> C)  invest in project B, since NPV<sub>B</sub> > NPV<sub>A</sub> D)  invest in project A, since NPV<sub>A</sub> > 0 Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to ________.


Definitions:

EVA

Economic Value Added, a measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit.

Operating Income

This metric reflects the profits earned from a company's core business operations, excluding non-operating income and expenses.

Cost Of Capital

The essential return rate an enterprise has to produce on its investment activities to sustain its market assessment and appeal to investors.

Cost Of Capital

The essential profit ratio a company is expected to reach in its investing endeavors to keep its marketplace value and attract financial backers.

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