Capital budgeting analysis of mutually exclusive projects A and B yields the following:

_____Project A_________Project B

IRR…..18% >>>>>>>>>>>>22%

NPV…..$270,000 >>>>>>>>$255,000

Payback…2.5 yrs >>>>>>>>>2.0 yrs

Period

Management should choose:

Project B because most executives prefer the IRR method

Project B because two out of three methods choose it

Project A because NPV is the best method

either project because the results aren’t consistent

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