When managers select correctly from among mutually exclusive projects,they:
A) may give up rate of return for NPV.
B) may give up NPV for rate of return.
C) have a tendency to select the largest project.
D) focus on the payback method to avoid conflicting signals.

Question

Quizplus · Accepted Answer

When selecting among mutually exclusive projects, managers should focus on choosing the project with the highest net present value (NPV) rather than the highest rate of return. This is because the NPV takes into account the time value of money and provides a more accurate measure of the project's profitability. Therefore, managers may give up a higher rate of return for a project with a higher NPV.

When Managers Select Correctly from Among Mutually Exclusive Projects,they