Question

Assume the following: Project A NPV = $5,767 IRR = 18.2% Project B NPV = $2,398 IRR = 20.3% If projects were independent, which project(s) should be selected? Group of answer choices

Select project B only

Select project A only

Both projects would be selected

Answer 1

Correct Anwer: Option C ) Both projects would be selected

Reasoning:

Since both, the projects are independent in nature and not mutually exclusive, all the projects with NPV greater than zero must be accepted. A positive net present value indicates that the projected earnings generated by projects exceed the costs, also in the present dollar.

If project A and project B would have been mutually exclusive, project A would have been given a priority over project B as it has higher NPV value. Thus Option B is incorrect. Under no circumstance project, B would have been chosen making Option C incorrect.

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