Comparing Investment Criteria Consider two mutually exclusive R&D projects that ADM is considering. Assume the discount rate for ADM is 15 percent.

Project A: Server CPU .13 micron processing project.

By shrinking the die size to .13 micron, ADM will be able to offer server CPU chips with lower power consumption and heat generation, meaning faster CPUs.

Project B: New telecom chip project.

Entry into this industry will require introduction of a new chip for cellphones.

The know-how will require a lot of upfront capital, but success of the project will lead to large cash fl ows later on.

Please fi ll in the following table:

Year A B 0 $100,000 $200,000 1 50,000 60,000 2 50,000 60,000 3 40,000 60,000 4 30,000 100,000 5 20,000 200,000 A B Implications NPV IRR Incremental IRR PI LO.1