Which model is preferred for choosing the best of several competing projects?

Question

Quizplus · Accepted Answer

The net present value (NPV) model is generally preferred for choosing the best of several competing projects. It considers the time value of money and provides a dollar value for the projects, allowing for comparison and selection of the most profitable option. The payback period and accounting rate of return do not necessarily account for the time value of money and may not provide accurate comparisons. The internal rate of return can be useful but may lead to decision-making errors in some cases. Therefore, NPV is the most reliable and comprehensive model for selecting the best project.

Which Model Is Preferred for Choosing the Best of Several