Two Projects Being Considered by a Firm Are Mutually Exclusive

question 197

Multiple Choice

Two projects being considered by a firm are mutually exclusive and have the following projected cash flows: Based only on the information given, which of the two projects would be preferred, and why?

• A) Project A, because it has a shorter payback period.
• B) Project B, because it has a higher IRR.
• C) Indifferent, because the projects have equal IRRs.
• D) Include both in the capital budget, since the sum of the cash inflows exceeds the initial investment in both cases.
• E) Choose neither, since their NPVs are negative.

---

Definitions:

Death Rates

This refers to the number of deaths in a particular population, scaled to the size of that population, per unit of time.

Malthusian Prediction

The theory proposed by Thomas Malthus that population growth will outpace agricultural production, leading to widespread poverty and famine.

Population Growth

The increase in the number of individuals in a population, usually expressed as an annual rate.

Standards Of Living

The level of wealth, comfort, material goods, and necessities available to a person, community, or nation, indicating the quality of life.