Projects A and B require an initial investment of $48,000 and $98,000,respectively.The projects are mutually exclusive and both have positive net present values.Which of these methods is probably the best method to use to determine which project to accept?
A)Payback
B)Modified IRR
C)AAR
D)Incremental IRR
E)IRR

Question

Quizplus · Accepted Answer

Since Projects A and B are mutually exclusive, the best method to use would be the incremental IRR method. This will calculate the IRR of the difference between the cash flows of the two projects. If the incremental IRR is greater than the required rate of return, then the higher IRR project should be accepted.

Projects a and B Require an Initial Investment of $48,000