In the case of independent projects:
A) the financial manager is responsible for choosing the average of these alternatives since only one can be chosen; selecting one project requires the selection of the other.
B) they are to be evaluated based on their expected effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget.
C) the financial manager is responsible for choosing the best of these alternatives since only one can be chosen; selecting one project precludes the other from being undertaken.
D) they are to be evaluated based on their past effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget.

Question

Quizplus · Accepted Answer

Independent projects are evaluated based on their expected effect on shareholder wealth, and all such projects that enhance shareholder wealth should be included in the firm's capital budget. The financial manager does not have to choose between the projects or select one over the other as they are evaluated separately.

In the Case of Independent Projects