Problem: Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data. Both projects have 5 year lives.
Project A Project B
NPV $15.090 $14,693
Payback period 2.76 years 2.51 years
Required return 8.3% 8.0%
Matt has been asked for his best recommendation given this information. His recommendation should be to accept:
A. project B because it has the shortest payback period.
B. both projects as they both have positive net present values.
C. project A and reject project B based on their net present values.
D. project B and reject project A based on other criteria not mentioned in the problem.
E. project B and reject project A based on both the payback period and the average accounting return.