Project Sigma requires an investment of $1 million and has a NPV of $10.Project Delta requires an investment of $500,000 and has a NPV of $150,000.The projects involve unrelated new product lines.
A)Both projects should be accepted because they have positive NPV's.
B)Neither project should be accepted because they might compete with one another.
C)Only project Delta should be accepted.Alpha's NPV is too low for the investment.
D)The company should look at other investment criteria,not just NPV.

Question

Quizplus · Accepted Answer

Both projects have positive NPVs, indicating that they will generate a return that is greater than the required rate of return. Since they involve unrelated product lines, there is no reason to believe that they will compete with each other. Therefore, both projects should be accepted.

Project Sigma Requires an Investment of $1 Million and Has