单选题
The financial manager at IBFM, a farm implement distributor, is
contemplating the following three mutually exclusive projects. IBFM's required
rate of return is 9.5 percent. Based on the information provided, which should
the financial manager select and why?
|
Project |
Investment at t=0 |
Cash Flow at t=1 |
IRR |
NPV @ 9 5 percent |
|
A |
$10000 |
$11300 |
13.00 |
$320 |
|
B |
$25000 |
$29000 |
16.00 |
$1484 |
|
C |
$35000 |
$40250 |
15.00 |
$1758 |
- A. Project A with the lowest initial investment.
- B. Project B with the highest internal rate of return.
- C. Project C with the highest net present value.
【正确答案】
C
【答案解析】When projects are mutually exclusive, only one can be chosen. Project selection should be done on the basis of which project will enhance firm value the most. That project, Project C in this case, is the one with the highest NPV.