CFA Practice Question
When comparing mutually-exclusive projects ______
A. You should accept the project with the largest NPV, assuming no constraint of capital.
B. You should always choose the highest return project based on the IRR and not the NPV.
C. You should accept all projects that meet the hurdle rate.
Explanation: Whenever a conflict exists, NPV method should be used.
User Contributed Comments 2
| User | Comment |
|---|---|
| phuviet281 | Why not C? Because they are mutually exclusive projects so you can choose both of them if their NPV > 0? |
| MaresaJaden | Mutually exclusive means you can choose one or the other, not both. Independent means you could choose both if they have positive NPVs. |