T3Q28 Multiple Choice Isaac has analyzed two projects of similar size, but his c

Question

T3Q28 Multiple Choice

Isaac has analyzed two projects of similar size, but his company can only fund one of the projects. Isaac has compiled the following information based on his analysis. Both projects have 3-year lives.

                                          Project A                  Project B
Net Present Value             $81,406                    $82,909
Payback Period                  2.31 years                 2.48 years
Avg. Accounting Return      9.58%                     9.53%
  
Isaac has been asked for his best recommendation given this information. His recommendation should be to accept:

A. both projects based on net present value.
B. project B based on its higher net present value.
C. project A because it has the shortest payback period.
D. project A based on the average accounting returns.
E. project A since that is the better project under two of the three methodologies.

please double check work

Explanation / Answer

B. project B based on its higher net present value.

Since Average accounting return and Payback period dose not consider time value of money

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