What is the preferred model for choosing the best of several competing projects?

Question

Quizplus · Accepted Answer

The preferred model for choosing the best of several competing projects is the net present value (NPV) method. This method takes into consideration the time value of money and provides a dollar amount that reflects the value of an investment in today's dollars, by subtracting the initial investment from the present value of expected future cash flows. The project with the highest positive NPV should be chosen, as it represents the greatest value to the organization. The internal rate of return (IRR) and payback period methods are useful in assessing the viability of a project, but they do not consider the total value of the investment. The accounting rate of return (ARR) is also not as useful for this purpose, as it only measures the return on investment as a percentage of the investment amount, without considering the time value of money or the value of future cash flows.

What Is the Preferred Model for Choosing the Best of Several