As chief financial officer, it is your responsibility to weigh the financial pros and cons of the

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As chief financial officer, it is your responsibility to weigh the financial pros and cons of the many investment opportunities developed by your company's research and development division. You are currently evaluating two competing 15-year projects that differ in several ways. Relative to your firm's current EPS, the first project is expected to generate above-average EPS during the first 5 years, average EPS during the second five years, and then below-average EPS during the last 5 years. The second project is expected to generate below-average EPS during the first 5 years, average EPS during the second 5 years, and then well-above-average EPS during the last 5 years. Is the choice obvious if you expect that the second investment will result in a larger overall earnings increase? Given the goal of the firm, what issues will you consider before making a final decision?
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Principles of Managerial Finance

ISBN: 978-0133507690

14th edition

Authors: Lawrence J. Gitman, Chad J. Zutter

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