Asked by Jessica Green on May 05, 2024
Verified
A company evaluating projects when there is a resource constraint should simply choose the projects with the highest NPV.
NPV
Net Present Value, a calculation that discounts future cash flows to their present value to evaluate the profitability of an investment or project.
Resource Constraint
Limitations on the availability of resources such as time, money, and labor that can restrict project progress or business growth.
- Comprehend how resource constraints influence project selection based on NPV.
Verified Answer
BA
Brooke AshtonMay 10, 2024
Final Answer :
False
Explanation :
When there is a resource constraint, the company should not only consider the NPV but also the availability of resources for each project. It may not be feasible to choose the project with the highest NPV if it requires more resources than the company can allocate. The company should prioritize projects with the highest NPV per unit of resources required.
Learning Objectives
- Comprehend how resource constraints influence project selection based on NPV.