Question

Choose the most accurate​ statement: If these projects are mutually exclusive​, which project should be chosen by the CEO of the firm if the​ CEO’s primary objective is to maximize shareholder​ value? Assume the opportunity cost of capital is​ 10% for both projects

Answer 1

Project A is the better option than Project B.

Step-by-step explanation:

The NPV of the project will decide which is the option with greater value to shareholders. As we can see that the NPV of Project A at 10% cost of capital is greater than the NPV of Project B at the same 10% cost of capital. So the best option here is Project A as is more in value than project B. Hence the CEO must select Project A.