Which of the following is most correct?

Question

Quizplus · Accepted Answer

A) Stand-alone projects with positive NPV's should always be accepted.
B) Mutually exclusive projects with positive NPV's should always be accepted.
C) Projects can be mutually exclusive even if they address totally different business issues.
D) Both a. and c. are correct.
E) All of the above are correct.

B) Mutually exclusive projects with positive NPV's should always be accepted: This statement is not always true. Mutually exclusive projects are those where the acceptance of one project precludes the acceptance of the other project. In such a case, we need to compare the projects using an appropriate capital budgeting technique such as NPV, IRR, PI or MIRR to determine which project adds more value to the firm. Only the project with the highest value should be accepted.

C) Projects can be mutually exclusive even if they address totally different business issues: This statement is true. Mutually exclusive projects refer to projects that cannot be executed simultaneously. They do not have to be similar projects competing for the same resources. They could be completely different projects in different business areas or products.

Therefore, since statement A is generally true, and C is true, the best answer is D.

Which of the Following Is Most Correct