Consider the Following Two Projects

question 18

Multiple Choice

Consider the following two projects:

Assume that projects A and B are mutually exclusive. The correct investment decision and the best rationale for that decision is to ________.

• A) invest in project A, since NPVB < NPVA
• B) invest in project B, since IRRB > IRRA
• C) invest in project B, since NPVB > NPVA
• D) invest in project A, since NPVA > 0

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Definitions:

Total Utility

The total satisfaction received from consuming a particular quantity of goods and services.

Donuts

Circular or ring-shaped fried dough treats, often sweetened and sometimes filled or topped with various ingredients.

Burritos

A Mexican dish consisting of a flour tortilla wrapped or folded around a filling typically including beans, cheese, and meats.

Income

The money received by a person or organization, typically in exchange for goods, services, or investments.