Question: Isaac has analyzed two mutually exclusive projects that have 3-year lives. Project A has an NPV of $81,406, a payback period of 2.4 years, and
Isaac has analyzed two mutually exclusive projects that have 3-year lives. Project A has an NPV of $81,406, a payback period of 2.4 years, and an IRR of 9.3%. Project B has an NPV of $83,909, a payback period of 2.6 years, and an IRR of 9.0%. The required return for both Projects is 8%, at a minimum. Isaac must make a recommendation and justify it to his manager. What should his recommendation be? Accept Project A because it has a higher IRR. Accept Project B based on the NPV. Accept Project A because it has the shortest payback period. Accept both projects because both NPVs are positive
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