As the Director of Capital Budgeting for Denver Corporation, You

question 93

Multiple Choice

As the director of capital budgeting for Denver Corporation, you are evaluating two mutually exclusive projects with the following net cash flows: If Denver's required rate of return is 15 percent, you would choose?

• A) Neither project.
• B) Project X, since it has the higher IRR.
• C) Project Z, since it has the higher NPV.
• D) Project X, since it has the higher NPV.
• E) Project Z, since it has the higher IRR.

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Definitions:

Financing Activities

Transactions related to raising capital and repaying investors, including issuing equity, obtaining loans, and paying dividends.

Cash Flows

The total amount of money being transferred into and out of a business, affecting its liquidity.

Investing Activities

Transactions and events related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.