You are trying to decide between three mutually exclusive investment opportunities.The most appropriate tool for identifying the correct decision is:
A)NPV.
B)profitability index.
C)IRR.
D)incremental IRR.

Question

Quizplus · Accepted Answer

NPV (Net Present Value) is the most appropriate tool for identifying the correct decision because it takes into account the time value of money and provides a dollar value measure of the expected profitability of an investment over its lifetime. It measures the difference between the present value of cash inflows and the present value of cash outflows, and a positive NPV indicates that the investment is profitable. Profitability index and IRR are also useful measures, but they do not provide a dollar value measure of profitability, and incremental IRR is only useful if there are multiple projects with different investment levels. Therefore, NPV is the best choice for identifying the correct investment decision.

You Are Trying to Decide Between Three Mutually Exclusive Investment