Question

The most reliable capital budgeting technique that should be considered when comparing between mutually exclusive alternative investments isA. Internal Rate of Return MethodB. Traditional Payback Period MethodC. Net Present Value MethodD. Modified IRR Method (IRR)

Answer 1

Answer:

The most reliable capital budgeting technique that should be used when comparing mutually exclusive alternative investments is net present value.

The correct answer is C

Explanation:

Net present value is the difference between present value of inflow and present value of outflow. NPV is superior to other investment appraisal techniques because of its value additivity. Whenever conflict arises between net present value and internal rate of return, the conflict is resolved in the favour of net present value.