When projects are mutually exclusive, selection should be made according to the project with the:
A)Longer life
B)Larger initial size
C)Highest IRR
D)Highest NPV

Question

Quizplus · Accepted Answer

The highest NPV should be the deciding factor when choosing between mutually exclusive projects. NPV takes into account the time value of money and provides the total expected value of a project over its entire life, making it a better measure than IRR or initial size. Longer life may not be advantageous if the cash flows are not significant enough, so it is not a definitive criterion.

When Projects Are Mutually Exclusive, Selection Should Be Made According