A developer at Apple wants to convince the finance department that investing in the Apple glasses project is a good idea. The project needs a $50 million budget, and estimated cash flows from selling Apple glasses will be $70 million the following year. The discount rate of this project is 12%.

The marketing department wants to use the $50 million budget to advertise the Apple TV instead. They expect the advertising campaign will increase cash flows from TV sales by $20 million for 4 years, the first sales arrives in one year. The appropriate discount rate for this project is 8%.

Which of two investments should the financial manager of Apple invest in?

• A.

  Apple glasses since the NPV is higher.

• B.

  Apple glasses development, since the IRR is higher than the benchmark.

• C.

  Apple TV advertising, since the IRR is higher than the IRR of the Apple glasses development.

• D.

  Apple TV since the NPV is higher.