Projects A and B require an initial investment of $48,000 and $98,000,respectively.The projects are mutually exclusive,and you know the smaller project has a positive NPV.Which one of these methods is probably the best method to use to determine which project to accept?
A)Discounted payback
B)Modified internal rate of return
C)Average accounting rate of return
D)Incremental internal rate of return
E)Internal rate of return

Question

Quizplus · Accepted Answer

The Incremental Internal Rate of Return (IRR) is best for comparing mutually exclusive projects, especially when they have different scales of investment.

Projects a and B Require an Initial Investment of $48,000