Should the short-run effects on eps influence the ch, Finance Basics

A firm has a $100 million capital budget. It is considering two project, each costing $100 million. Project A has an IRR of 20%; has an NPV of $9 million; and will be terminated after 1 year at a profit of $20 million, resulting in an immediate increase in EPS. Project B, which cannot be postponed, has an IRR of 30% and an NPV of $50 million. However, the firm''s short-run EPS will be reduced if it accepts Project B because no revenues will be generated for several years.
1.Should the short-run effects on EPS influence the choice between the two projects?
2.How might situations like this influence a firm''s decision to use payback?
Posted Date: 6/30/2015 12:59:54 AM | Location : Philippines

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