Consider Projects S and L

question 73

Multiple Choice

Consider projects S and L.Both have normal cash flows, and the projects have the same risk, hence both are evaluated with the same cost of capital, 10%.However, S has a higher IRR than L.Which of the following statements is CORRECT?

• A) If Project S has a positive NPV, Project L must also have a positive NPV.
• B) If the cost of capital falls, each project's IRR will increase.
• C) If the cost of capital increases, each project's IRR will decrease.
• D) If Projects S and L have the same NPV at the current cost of capital, 10%, then Project L, the one with the lower IRR, would have a higher NPV if the cost of capital used to evaluate the projects declined.
• E) Project S must have a higher NPV than Project L.

Comprehend the concept of prime cost and how it relates to direct materials and direct labor.

Understand the role of depreciation as either a product or period cost depending on its association with production or administrative functions.

Identify and classify different types of costs in a business environment, including fixed, variable, and mixed costs.

Understand the concept of cost behavior and how costs change with varying levels of activity.

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Definitions:

Transverse Foramina

Small openings in the transverse processes of the cervical vertebrae allowing passage of the vertebral artery.

Transverse Processes

Lateral projections from the vertebrae to which muscles and ligaments attach, and serve as points of articulation for ribs in thoracic vertebrae.

Vertebral Arch

The structure in a vertebra that encloses the spinal cord, formed by pedicles and laminae.

Lamina

Part of the vertebral arch in the spine that forms the back part of the spinal canal which encloses and protects the spinal cord.