Question 19 3 pts Planetary Pizza is attempting to streamline their pizza delive

Question

Question 19 3 pts Planetary Pizza is attempting to streamline their pizza delivery system. It can either install satellite delivery locations or remodel its main location with a separate prep station for delivery, but not both. The satellite delivery locations would be more expensive initially, but would also produce higher future cash flows for a longer period of time. Which investment decision criteria should Planetary use to evaluate this choice? Neither NPV nor IRR is appropriate ONPV Either NPV or IRR is appropriate IRR

Explanation / Answer

C. Either NPV or IRR is appropriate.

NPV is generally used. It is a method uses the dicounting factor of all the cash flow to bring it to its present value. Therefore we can find NPV of both the project and choose the project which have higher NPV. It is in monetary term and so it makes easy to interpret the decisions.

On the other hand IRR is the return that the project is giving. We can also use irr for decision as higher irr better is the project. We can find irr of both the project and choose the higher one

Hence both the method can be used for this case.

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