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Piercy, LLC, has identified the following two mutually exclusive projects
Piercy, LLC, has identified the following two mutually exclusive projects. B 12% project A IRR 109 10 NPV million 5 million Which project will you choose based on the appropriate decision rule? DB O Bath A and B A
Expert Solution
In case of mutually exclusive projects, we always choose only one project out of multiple projects. The project that needs to be selected shall be the one which has a positive as well as the highest NPV.
In the present case, out of projects A and B, Project A shall be selected since it has a NPV which is positive as well the NPV of Project A is greater than the NPV of Project B.
Hence the correct answer is option of Project A.
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