Question
Project A has a net present value of $1,500, a payback period of 2 years, and an internal rate of return of 12%. Project B
Project A has a net present value of $1,500, a payback period of 2 years, and an internal rate of return of 12%. Project B has a net present value of $1,800, a payback period of 4 years, and an internal rate of return of 10%. Project C has a netpresent value of $1,750, a payback period of 3 years, and an internal rate of return of 11%. If the projects are mutually exclusive, which project should be undertaken?
| A. | Project A because it has a higher IRR than the other two projects and pays back in the shortest period of time. | |
| B. | Project C because it has an NPV that is only slightly less than that of Project B and offers a higher IRR and a shorter payback period than Project B. | |
| C. | Project B and Project C are equally acceptable since each would increase firm value by the same amount. | |
| D. | Project B because it has the highest NPV of the three projects. |
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International Financial Reporting A Practical Guide
Authors: Alan Melville
6th edition
1292200743, 1292200766, 9781292200767, 978-1292200743
