Which statement regarding capital budgeting is accurate?

The statement that comparing NPVs helps prioritize mutually exclusive projects is accurate because it reflects a fundamental principle in capital budgeting. Net Present Value (NPV) is a method used to assess the profitability of an investment or project by calculating the present value of future cash flows generated by the project, minus the initial investment cost.

When dealing with mutually exclusive projects—where selecting one project precludes the selection of another—NPV provides a systematic approach to evaluate which project is likely to bring the most value to the organization. By calculating and comparing the NPV of each project, decision-makers can identify which project offers the greatest potential increase in wealth, allowing for informed prioritization based on financial data.

The other statements do not accurately represent the principles of capital budgeting. For instance, prioritizing short-term investments does not universally hold true, as the strategic goals of a business might favor long-term investments that drive sustainable growth. Additionally, NPV is not restricted to long-term projects; it can be applicable to projects of varying durations. Lastly, while positive NPVs indicate that a project is expected to add value, the acceptance of projects solely based on this criterion can overlook the strategic fit and broader context in which the investment occurs. Therefore, option C captures the essence