Asked by Andres Velazquez on Jun 27, 2024
Verified
Which of the following best describes the appropriate way to evaluate mutually exclusive projects with unequal lives?
A) NPV is the appropriate method because NPV is always the method of choice.
B) IRR is the appropriate method because IRR adjusts for the fact that the projects are not of the same length.
C) Replacement chain is the appropriate method because it equalizes the length of the unequal projects.
D) Equivalent annual annuity is the appropriate method because it adjusts for the fact that the projects are not of the same length.
E) Both c. and d. are correct.
Mutually Exclusive
Mutually exclusive describes a scenario where the occurrence of one event makes the occurrence of another impossible.
Unequal Lives
Refers to comparing projects or assets with different durations or expected lifetimes to make investment or capital budgeting decisions.
Equivalent Annual Annuity
A method used in capital budgeting to compare the profitability of investments with different lifespan by converting them into an equivalent annuity.
- Compare projects with unequal lives using appropriate methods.
Verified Answer
Learning Objectives
- Compare projects with unequal lives using appropriate methods.
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