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Patrick has analyzed two mutually exclusive projects of similar size and has compiled the following...

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Finance

Patrick has analyzed two mutually exclusive projects of similar size and has compiled the following information based on his analysis. Both projects have 3- year lives.

Project 'RUNITIN'

NPV $81,406

Ordinary Payback 2.48 yrs

Requires Return 9.58% I

RR 11.53%

Project 'PASSIT'

NPV $82,909

Ordinary Payback 2.31 yrs

Requires Return 9.53%

IRR 11.25%

Patrick has been asked by his jolly boss, Mr. Reid, for his best recommendation given this information. His recommendation should be to accept:

- both projects.

- project 'PASSIT' because it has the shortest payback period.

- project 'PASSIT' and reject project 'RUNITIN' based on their net present values.

- project 'RUNITIN' and reject project 'PASSIT' based on their internal rate of returns.

- neither project.

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