171k views
5 votes
Which of the following will NOT lead to ambiguous decision-making when considering mutually exclusive projects?

I. AAR
II. PI
III. IRR
IV. NPV
A) I only
B) II and III only
C) II and IV only
D) I and IV only
E) IV only

User Zoe Rowa
by
7.9k points

1 Answer

6 votes

Final answer:

The NPV is the only measure out of AAR, PI, IRR, and NPV that does not lead to ambiguous decision-making when considering mutually exclusive projects.

Step-by-step explanation:

The correct answer is E) IV only. The NPV (Net Present Value) is the only measure out of the four listed (AAR, PI, IRR, and NPV) that does not lead to ambiguous decision-making when considering mutually exclusive projects. The NPV calculates the difference between the present value of cash inflows and the present value of cash outflows, taking into account the time value of money. It provides a clear measure of the profitability of a project and can be used to make an informed decision.

User John Gietzen
by
7.6k points