Which of the following statements is true about capital budgeting analysis? The

Question

Which of the following statements is true about capital budgeting analysis? The payback period method should be used for capital budgeting decisions if there is a conflict in the project rankings as per the NPV method and the IRR method The net present value (NPV) method should be used to evaluate independent projects, and the internal rate of return (IRR) method for mutually exclusive projects O A project should be purchased if its NPV is positive. The payback period method should be used for capital budgeting decisions if the project has multiple cash outflows. A project with only cash outflows and no cash inflows would have two internal rates of return (IRRs).

Explanation / Answer

A project should be purchased if the NPV is positive

since it signifies increase in wealth created for the company

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