Patrick has analyzed two mutually exclusive projects of similar size and has compiled the following...
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Patrick has analyzed two mutually exclusive projects of similar size and has compiled the following information based on his analysis. Both projects have 3- year lives.
Project 'RUNITIN'
NPV $81,406
Ordinary Payback 2.48 yrs
Requires Return 9.58% I
RR 11.53%
Project 'PASSIT'
NPV $82,909
Ordinary Payback 2.31 yrs
Requires Return 9.53%
IRR 11.25%
Patrick has been asked by his jolly boss, Mr. Reid, for his best recommendation given this information. His recommendation should be to accept:
- both projects.
- project 'PASSIT' because it has the shortest payback period.
- project 'PASSIT' and reject project 'RUNITIN' based on their net present values.
- project 'RUNITIN' and reject project 'PASSIT' based on their internal rate of returns.
- neither project.
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