With an unlimited amount of funds, a firm could accept all positive NP

With an unlimited amount of funds, a firm could accept all positive NPV projects. However, with limited budgets, managers are forced to accept some positive NPV projects while rejecting others.

What overall financial rule should managers follow when choosing the portfolio of projects to accept? Why?
What will be an ideal response?

ANSWER

Answer: Managers should maximize the NPV of the portfolio of accepted projects. NPV measures the total financial benefit to existing shareholders. Other techniques are flawed in some fashion. For instance, IRR measures the return per dollar spent, but does not necessarily maximize the total return to shareholders.