Hi,

I have a question regarding #17, (f). On the solution, it says "NPV doesn't have ranking problem." What does it mean by that?

Thank you very much in advance!

x Step 30 of 30 Final decision: In this case, according to NPV criterion, Project A should be selected but according to payback period, discounted payback period, IRR, and profitability index criterion, Project B should be selected. But, the final outcome should be based on NPV because compared to other capital budgeting techniques, NPV does not have ranking problem. Hence, finally Project A should be accepted. Consider the following two Budgeting PART 17. Comparing Investment Criteria (LO1, 2, 3, 5, 7] Conside mutually exclusive projects: Year Cash Flow (A) - $455,000 Cash Flow (B) - $65,000 31,000 58,000 85,000 85,000 572,000 28,000 25,500 19,000 Whichever project you choose, if any, you require a return of 11 percent on investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the discounted payback criterion, which investment will you choose! Why? c. If you apply the NPV criterion, which investment will you choose? Why? d. If you apply the IRR criterion, which investment will you choose? Why? e. If you apply the profitability index criterion, which investment will you choose Why? 1. Based on your answers in (a) through (e), which project will you n Why? project will you finally choose? x 18 NRW