You are considering the following two mutually exclusive projects. The required return on each project is 12 percent. Which project should you accept and what is the best reason for that decision? Year Project A Project B -$10,000 -$20,000 1 3,000 5,000 2 8,000 7,000 3 4,000 12,000 2,000 10,000 Select one: a. D. Project A; because it has the higher net present value O b. C. Project B; because it has the higher profitability index O c. A. Project A; because it pays back faster O d. B. Project A; because it has the higher profitability index E. Project B; because it has the higher net present value 4.
You are considering the following two mutually exclusive projects. The required return on each project is 12 percent. Which project should you accept and what is the best reason for that decision? Year Project A Project B -$10,000 -$20,000 1 3,000 5,000 2 8,000 7,000 3 4,000 12,000 2,000 10,000 Select one: a. D. Project A; because it has the higher net present value O b. C. Project B; because it has the higher profitability index O c. A. Project A; because it pays back faster O d. B. Project A; because it has the higher profitability index E. Project B; because it has the higher net present value 4.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are considering the following two mutually exclusive projects. The required return on each project is 12 percent. Which project should you accept and what is the best reason for that decision?
| Year | Project A | Project B |
|------|-----------|-----------|
| 0 | -$10,000 | -$20,000 |
| 1 | 3,000 | 5,000 |
| 2 | 8,000 | 7,000 |
| 3 | 4,000 | 12,000 |
| 4 | 2,000 | 10,000 |
Select one:
- a. D. Project A; because it has the higher net present value
- b. C. Project B; because it has the higher profitability index
- c. A. Project A; because it pays back faster
- d. B. Project A; because it has the higher profitability index
- e. E. Project B; because it has the higher net present value
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