A firm is considering several mutually exclusive investment opportunities.The best way to choose between them is which of the following?
A)profitability index
B)payback period
C)net present value (NPV)
D)internal rate of return (IRR)
E)discounted payback period

Question

Quizplus · Accepted Answer

The best way to choose between mutually exclusive investment opportunities is to evaluate the net present value (NPV) of each option. NPV takes into account the time value of money and considers both the initial investment and the expected cash flows over time. The option with the highest positive NPV is the most financially attractive investment opportunity. Profitability index, payback period, internal rate of return, and discounted payback period are also useful metrics, but they don't account for the time value of money as accurately as NPV does. Therefore, the best choice is C.

A Firm Is Considering Several Mutually Exclusive Investment Opportunities