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Project Acceptance Criteria

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As a financial officer, you must determine which project your company should accept. The projects are mutually exclusive and the net present value (NPV) calculations for each take into account the project's risk. Indicate which project (A or B) you would recommend and explain your reasons for this recommendation.

Project A
Project B

NPV
$3 million
$2.5 million

Risk Level
very risky
very safe.

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Solution Summary

This solution determines what criteria projects should be assessed for to be accepted in a company and incorporates NPV calculations to determine if you as the financial officer should accept project A or B.

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The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm's investment decisions would generally include expansion, acquisition, modernization and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision. First, the most important ...

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