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You are a financial analyst that's been employed by Diacono Industries to assist them in assessing which of the following two mutually exclusive projects they
You are a financial analyst that's been employed by Diacono Industries to assist them in assessing which of the following two mutually exclusive projects they should undertake; Project A or Project B. They tell you that the required return from each of the projects is 12% p.a. and supply you with the information in the table below that they have assured you that you can rely upon. The company is concerned that there may be a conflict in the rankings provided by the NPV and IRR techniques. 12. Your contact at Diacono Industries says "IRR and NPV seem useless if they can't give the same rankings. Maybe we should just exclusively use the standard payback period measure to rank mutually exclusive projects from now on!". In no more than 8 lines, and based only on your incremental NPV calculation and the information provided in the table above, provide a response to your contact that does the following: a. Explains the circumstances under which the NPV and IRR techniques may give different rankings specifically in relation to these two projects being considered by Diacono Industries b. Addresses their suggested solution. You are a financial analyst that's been employed by Diacono Industries to assist them in assessing which of the following two mutually exclusive projects they should undertake; Project A or Project B. They tell you that the required return from each of the projects is 12% p.a. and supply you with the information in the table below that they have assured you that you can rely upon. The company is concerned that there may be a conflict in the rankings provided by the NPV and IRR techniques. 12. Your contact at Diacono Industries says "IRR and NPV seem useless if they can't give the same rankings. Maybe we should just exclusively use the standard payback period measure to rank mutually exclusive projects from now on!". In no more than 8 lines, and based only on your incremental NPV calculation and the information provided in the table above, provide a response to your contact that does the following: a. Explains the circumstances under which the NPV and IRR techniques may give different rankings specifically in relation to these two projects being considered by Diacono Industries b. Addresses their suggested solution
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