Question
17. You have conducted a capital budgeting analysis of projects A, B and C with the following results: NPV IRR Payback A 200,000 8.7% 4
17. You have conducted a capital budgeting analysis of projects A, B and C with the following results: NPV IRR Payback A 200,000 8.7% 4 years B -100,000 5.6% 3 years C 300,000 9.8% 5 years If r=7% and the company has set the payback cutoff at 3 years, which is false? (a) Each project is acceptable under at least one method (b) The IRR and NPV would lead to different acceptance decisions on at least one project (c) The payback period focuses on speed of payback instead of the best financial decision (d) Based on best practices for capital budgeting discussed in class, A and C should be accepted
why A is true and B is false??
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