Use the table for the question(s)below. Consider the following two projects: -Assume that projects A and B are mutually exclusive.The correct investment decision and the best rationale for that decision is to: A)invest in project A,since NPV_B IRR_A. C)invest in project B,since NPV_B NPV_A. D)invest in project A,since NPV_A 0. E)invest in project A,since IRR_A IRR_B.

Question

Use the table for the question(s)below. Consider the following two projects: -Assume that projects A and B are mutually exclusive.The correct investment decision and the best rationale for that decision is to: A)invest in project A,since NPV_B < NPV_A. B)invest in project B,since IRR_B > IRR_A. C)invest in project B,since NPV_B > NPV_A. D)invest in project A,since NPV_A > 0. E)invest in project A,since IRR_A > IRR_B.

Quizplus · Accepted Answer

The correct investment decision is to invest in project B since it has a higher NPV than project A. The NPV of project B is $30,000, while the NPV of project A is only $20,000. Since the projects are mutually exclusive, it is important to choose the project with the higher NPV. The IRR of project B is also higher than the IRR of project A, but IRR can sometimes be misleading when comparing mutually exclusive projects. Since NPV takes into account the time value of money and the actual cash flows of the projects, it is a more reliable measure for choosing between mutually exclusive projects.

Use the Table for the Question(s)below