Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data. Both

Question:

Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data. Both projects have 5 year lives.

2013 2012 Costs incurred to date $5,400,000 $8,400,000 Estimated costs to complete 3,600,000 Billings to date 4,200,000

Matt has been asked for his best recommendation given this information.
His recommendation should be to accept:
A. project B because it has the shortest payback period.
B. both projects as they both have positive net present values.
C. project A and reject project B based on their net present values.
D. project B and reject project A based on other criteria not mentioned in the problem.
E. project B and reject project A based on both the payback period and the average accounting return.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...