Companies are presented with viable alternatives that sometimes produce nearly identical results and profitability goals. If they have the ability to invest in both alternatives, they may do so. But what about when resources are constrained? How do they choose which investment is best for their company? Consider this: you have two projects that met the payback period and accounting rate of return screenings identically. Project 1 produced an NPV of $45,000 and had an IRR between 5% and 8%. Project 2 produced a NPV of $35,000 and had an IRR of 10%. This leaves you with a difficult choice, since each alternative has a measurement that exceeds the other and the other variables are the same. Which project would you invest in and why?
Companies are presented with viable alternatives that sometimes produce nearly identical results and profitability goals. If they have the ability to invest in both alternatives, they may do so. But what about when resources are constrained? How do they choose which investment is best for their company?
Consider this: you have two projects that met the payback period and accounting
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