Project H Requires an Initial Investment of $100,000 and the Produces

question 84

Multiple Choice

Project H requires an initial investment of $100,000 and the produces annual cash flows of $50,000, $40,000, and $30,000. Project T requires an initial investment of $100,000 and the produces annual cash flows of $30,000, $40,000, and $50,000. If the required rate of return is greater than 0% and the projects are mutually exclusive

• A) H will always be preferable to T.
• B) T will always be preferable to H.
• C) H and T are equally attractive.
• D) The project rankings will change with different discount rates.

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Definitions:

Expense Ratio

A measure depicting the percentage of a fund's assets that are used for administrative and other operating expenses, directly affecting investors' returns.

Mutual Fund

An investment company pooling and managing funds of investors.

Significant Leverage

Utilization of borrowed money or financial instruments to increase the potential return of an investment.

Hedge Funds

Investment funds that use advanced strategies, including leverage, derivatives, and short selling, aiming for high returns.