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1. Other things being equal, for projects having identical
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1. Other things being equal, for projects having identical outlays, the accounting rate of return will favour:

a. the project with the highest discount rate

b. the project with the lowest discount rate

c. the project with the longer life

d. the project with the shorter life

2. A firm has to decide between two mutually exclusive projects, Alpha and Beta. Project Alpha has an NPV of \$25 000 (IRR = 12 per cent) and project Beta has an NPV of \$15 000 (IRR = 16 per cent). Given this information and assuming a required rate of return of 10 per cent, what should the firm do?

a. invest in project A

b. invest in project B

c. not invest in project A or project B, as NPV and IRR signals are mixed

d. invest in both project A and project B

3. Two projects, A and B, are said to be mutually exclusive if:

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This question was answered on: Feb 21, 2020

Solution~000853197.zip (18.37 KB)