Which of the following capital budgeting proposals is most likely to display a conflict of interests?
A)The proposal with the highest NPV
B)The proposal with the longest payback period
C)The proposal with highest IRR and quickest payback
D)The proposal to solve pollution problems

Question

Quizplus · Accepted Answer

The proposal with the highest IRR and quickest payback may create a conflict of interest between short-term and long-term objectives. While the proposal may seem financially attractive due to its high IRR and quick payback, it may not be the best long-term investment for the company. This could result in a conflict between the finance department, which may be focused on short-term financial gains, and other departments, such as production or research and development, which may prioritize long-term objectives.

Which of the Following Capital Budgeting Proposals Is Most Likely