medium · Principles of Finance
A manager is forced to choose between Project Alpha (NPV $50,000, Cost $100,000) and Project Beta (NPV $60,000, Cost $150,000).
If the firm's goal is to maximize the efficiency of capital usage under a tight budget, which project is superior?
- Project Alpha because its profitability index is higher
- Both are equal because they both have positive NPVs
- Project Beta because its net present value is higher
- Project Alpha because the initial investment is lower
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