Project EH! requires an initial investment of $50,000, and has a net present value of $12,000. Project BE requires an initial investment of $100,000, and has a net present value of $13,000. The projects are mutually exclusive. The firm should accept
A) project EH!.
B) project BE.
C) both projects.
D) neither project.

Question

Quizplus · Accepted Answer

Since the projects are mutually exclusive, the firm can only choose one. Project BE has a higher net present value ($13,000) compared to Project EH! ($12,000) despite the fact that it requires a higher initial investment. Therefore, the firm should choose Project BE.

Project EH! Requires an Initial Investment of $50,000, and Has