When managers select correctly from among mutually exclusive projects,they:
A) may give up rate of return for NPV.
B) may give up NPV for rate of return.
C) have a tendency to select the largest project.
D)focus on payback method to avoid conflicting signals

Question

Quizplus · Accepted Answer

When managers select correctly from among mutually exclusive projects, they should prioritize projects based on their net present value (NPV) rather than their rate of return. Although rate of return is an important consideration, it does not take into account the time value of money, which can greatly affect the overall profitability of a project. In some cases, the project with the highest rate of return may not have the highest NPV, and choosing the project with the highest NPV will ultimately lead to better long-term financial outcomes for the business. Therefore, the best choice is to prioritize NPV over rate of return.

When Managers Select Correctly from Among Mutually Exclusive Projects,they