Using the total project approach to investment decisions,the following information is available:
Net present value of Alternative A is $12,000
Net present value of Alternative B is $14,000
If the differential approach is used to evaluate Alternatives A and B,what is the numerical result obtained?
A) $0
B) $2,000 advantage to Alternative B
C) $12,000
D) $14,000

Question

Quizplus · Accepted Answer

The differential approach involves subtracting the net present value of Alternative A from the net present value of Alternative B. Thus, the numerical result obtained would be: $14,000 - $12,000 = $2,000 advantage to Alternative B. Therefore, Alternative B is the best choice.

Using the Total Project Approach to Investment Decisions,the Following Information