If a company must choose between two mutually exclusive investment projects, the best general method to employ for decision-making purposes is:
A) Cash-flow bailout.
B) Cash-flow break-even.
C) Net present value (NPV).
D) Discounted payback.
E) Accounting (book) rate of return (ARR), based on average investment over the life of each project.

Question

Quizplus · Accepted Answer

Net present value (NPV) takes into account the time value of money and calculates the net present value of each investment project, allowing for an easy comparison between the two projects. The project with a higher NPV should be selected as it generates more value for the company.

If a Company Must Choose Between Two Mutually Exclusive Investment