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Quantitative Methods Q62

62Ms. Silvio, a corporate finance analyst is considering two mutually exclusive capital budgeting projects with conflicting rankings (one has the higher positive NPV, while the other has a higher IRR). The most appropriate project she can choose is the one with the:
  • Option : B
  • Explanation : When the IRR and NPV rules conflict in ranking projects, consider the NPV rule. The NPV of an investment represents the expected addition to shareholder wealth from an investment, and we take the maximization of shareholder wealth to be a basic financial objective of a company.
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