There are two mutually exclusive projects, Project A and Project B. Project A ha
ID: 2581560 • Letter: T
Question
There are two mutually exclusive projects, Project A and Project B. Project A has a net present value (NPV) of $3,000 and an internal rate of return (IRR) of 12%. Project B has an NPV of $4,000 and an IRR of 10%. Based on the scenario, which of the following statements is true regarding the mutually exclusive projects?
a.Project B should be selected as Project B provides a lower IRR than project A.
b.Project A should be selected as Project A provides a higher IRR than project B.
c.Project A should be selected as Project A provides a lower NPV than project B.
d.Project B should be selected as Project B provides a higher NPV than project A.
Explanation / Answer
Since A and B are mutually exclusive;project having higher NPV must be chosen.
Hence B must be selected.
Hence the correct option is D.