A company has identified two mutually exclusive projects which have an equivalent effect on the risk profile of the company: MetricProject IProject IIDiscounted payback period2.8 years3.2 yearsNet present value$17,200$15,700Internal rate of return18%22%Return on capital employed19%21% Assuming that the directors wish to maximize shareholder wealth and no shortage of capital is expected, which project should the company choose?

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General Studies · Capital Budgeting

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Project I because it has the higher net present value

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Answer 1

Project I because it has the shorter payback period

Answer 2

Project I because it has the higher net present value

Answer 3

Project II because it has the higher internal rate of return

Answer 4

Project II because it has the higher return on capital employed

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