Ontario Corp.'s management has determined that two independent projects have the following NPV:Project A NPV $5,000Project B NPV $10,000Which best describes the correct managerial decision given the information above (assume Ontario Corp can fund both projects if required)?
A)Decline both projects since they are independent and have positive NPVs.
B)Accept both projects since they are independent and have positive NPVs.
C)Accept B, and decline A, since B has a higher positive NPV compared to A.
D)In order to decide between these independent projects, we need the IRR of each project.

Question

Quizplus · Accepted Answer

Both projects have positive NPVs, which means they are expected to generate more value than their costs. Since the projects are independent, Ontario Corp. can fund both of them without any conflicts between them. Therefore, accepting both projects is the best decision for Ontario Corp.