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 B, since IRR_B IRR_A. B)invest in project B, since NPV_B NPV_A_{ 0}. C)invest in project A, since NPV_A 0. D)invest in project A, since NPV_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 B, since IRR_B > IRR_A. B)invest in project B, since NPV_B > NPV_A_{> 0}. C)invest in project A, since NPV_A > 0. D)invest in project A, since NPV_B < NPV_A.

Quizplus · Accepted Answer

When projects are mutually exclusive, the decision criterion should focus on which project adds more value to the firm. The correct decision is to invest in the project with the higher Net Present Value (NPV). Therefore, if Project B has a higher NPV than Project A, it means Project B is expected to add more value to the firm, making it the preferable choice.

Use the Table for the Question(s)below