When Ranking Two Mutually Exclusive Investments with Different Initial Amounts

Multiple Choice

When ranking two mutually exclusive investments with different initial amounts but approximately the same useful life, and assuming no capital rationing, management should give priority to the project:

A) That generates cash flows for the longer period of time.
B) Whose net after-tax cash flows equal the initial investment outlay.
C) That has the greater accounting rate of return (ARR) .
D) Whose cash flows vary the least.
E) That has the higher net present value (NPV) .