Consider the following two projects: Assume that projects Alpha and Beta are mutually exclusive. The correct investment decision and the best rationale for that decision is to ________. A)invest in project Beta, since NPV_Beta 0 B)invest in project Alpha, since NPV_Beta IRR_A D)invest in project Beta, since NPV_Beta NPV_Alpha 0

Question

Consider the following two projects: Assume that projects Alpha and Beta are mutually exclusive. The correct investment decision and the best rationale for that decision is to ________. A)invest in project Beta, since NPV_Beta > 0 B)invest in project Alpha, since NPV_Beta < NPV_Alpha C)invest in project Beta, since IRR_B > IRR_A D)invest in project Beta, since NPV_Beta > NPV_Alpha> 0

Quizplus · Accepted Answer

The best investment decision is to invest in project Beta, as it has a higher net present value (NPV) than Alpha (NPV for Beta is positive while Alpha has a negative NPV). Therefore, option D is the correct answer. Option A is incorrect as it only considers the NPV of Beta and does not compare it to Alpha. Option B is incorrect as it suggests investing in Alpha, which has a negative NPV. Option C is also incorrect as IRR does not take into account the size of the investment, and therefore cannot be used to compare mutually exclusive projects.

Consider the Following Two Projects: Assume That Projects Alpha