Canadian Division
The Canadian Division manager is choosing between two mutually exclusive projects. $\begin{array}{lll}&\text { Project } 123&\text { Project } 456\
\text { Net present value } & \$ 235,000 & \$ 210,000 \
\text { Internal rate of return } & 14 \% & 16 \%
\end{array}$ The company requires any project to earn at least 13%. The manager believes that cash inflows from the project can be reinvested at the rate of 13%.
-Refer to Canadian Division. Which project will the manager likely choose?

Question

Quizplus · Accepted Answer

The manager will likely choose Project 123 because it has a higher net present value (NPV) of $235,000 compared to Project 456's NPV of $210,000, even though Project 456 has a higher internal rate of return (IRR). Since the company requires a minimum return of 13%, both projects meet this requirement, but NPV is generally a better measure for mutually exclusive projects.

Canadian Division the Canadian Division Manager Is Choosing Between Two

Canadian Division
the Canadian Division Manager Is Choosing Between Two