登录之后可查看解析

Answer (B) is correct . Because unused funds cannot be invested at a rate greater than 12%, the company should select the investment with the highest net present value. Project Q is preferable to R because its return on the incremental $45,000 invested ($235,000 cost of Q – $190,000 cost of R) is greater than 12%.

Answer (A) is incorrect because Project P has a life of only 3 years, and the high IRR would be earned only for that period and could not be reinvested at that rate in Years 4 and 5. Also, P’s NPV is lower than that of Q.
Answer (C) is incorrect because Although P’s IRR of 18.7% for 3 years exceeds Q’s (17.6% for 5 years), the funds from P cannot be invested in Years 4 and 5 at greater than 12%.
Answer (D) is incorrect because The payback period is a poor means of ranking projects. It ignores both reinvestment rates and the time value of money.