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A firm is considering two investment projects, Yana and Zeta. These projects are NOT mutually exclusive. Assume the firm is not capital constrained. The initial
A firm is considering two investment projects, Yana and Zeta. These projects are NOT mutually exclusive. Assume the firm is not capital constrained. The initial costs and cashflows for these projects are:
Year Yana Zeta
0 -50,000 -45,000
1 19,000 10,000
2 17,000 20,000
3 25,000 25,000
a Using a discount rate of 10% calculate the net present value for each project. What decision would you make based on your calculations?
b How would your decision change if the discount rate used for calculating the net present value is 12%?
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