Two Projects Being Considered Are Mutually Exclusive and Have the Following

question 85

Multiple Choice

Two projects being considered are mutually exclusive and have the following projected cash flows: If the required rate of return on these projects is 10 percent, which would be chosen and why?

• A) Project B because of higher NPV.
• B) Project B because of higher IRR.
• C) Project A because of higher NPV.
• D) Project A because of higher IRR.
• E) Neither, because both have IRRs less than the required return.

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Definitions:

Laissez-Faire Economy

An economic system in which transactions between private parties are free from government intervention such as regulation, privileges, tariffs, and subsidies.

Purely Capitalist Economy

An economic system characterized by private or corporate ownership of capital goods, investments determined by private decision, and prices, production, and the distribution of goods determined mainly by competition in a free market.

Features of Capitalism

include private property ownership, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets, driving economic growth and innovation.

Corporate Entities

Organizations or companies recognized by law as a single entity, separate from its owners, with its own rights, responsibilities, and liabilities.