Capital budgeting analysis of mutually exclusive projects A and B yields the following: $\begin{array}{lll}
& \text { Project A } & \text { ProjectB } \
\text { IRR } & 18 \% & 22 \% \
\text { NPV } & \$ 270,000 & \$ 255,000 \
\text { Payback Period } & 2.5 \mathrm{yrs} & 2.0 \mathrm{yss}
\end{array}$ Management should choose:

Question

Capital budgeting analysis of mutually exclusive projects A and B yields the following: $\begin{array}{lll}
 & \text { Project A } & \text { ProjectB } \
\text { IRR } & 18 \% & 22 \% \
\text { NPV } & \$ 270,000 & \$ 255,000 \
\text { Payback Period } & 2.5 \mathrm{yrs} & 2.0 \mathrm{yss}
\end{array}$ Management should choose:

Quizplus · Accepted Answer

NPV is considered the best method for evaluating mutually exclusive projects because it directly measures the increase in value to the firm. Project A has a higher NPV, indicating it adds more value.

Capital Budgeting Analysis of Mutually Exclusive Projects a and B