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Your firm's CFO presents you with two capital budgeting proposals: one that involves buying a new...

Your firm's CFO presents you with two capital budgeting proposals: one that involves buying a new delivery truck with an NPV of $15,000 and an IRR of 10% and one that involves building additional warehouse space with an NPV of $12,000 and an IRR of 13%. The projects are independent projects. Which of the following is true?

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You should accept both projects since they have NPV > 0

You should accept the warehouse project since it has the greater IRR

You should accept the truck project since it has the highest NPV

It is not possible to know which project is best without knowing the return required by the firm

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Answer #1

You should accept both projects since they have NPV > 0

As projects are independent projects and they have positive NPV's both projects should be accepted

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