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Thombo Productions is considering two investment proposals. The first involves a quality improvement project, and the second is about an advertising campaign. The cash flows
Thombo Productions is considering two investment proposals. The first involves a quality improvement project, and the second is about an advertising campaign. The cash flows associated with each project appear below. Suppose the hurdle rate of the firm is 10%. If the two projects are mutually exclusive, which project should be chosen?
|
| Quality Improvement | Advertising Campaign |
| Initial cash outflow | $200,000 | $200,000 |
| Cash Inflows |
|
|
| Year 1 | 20,000 | 160,000 |
| Year 2 | 60,000 | 90,000 |
| Year 3 | 250,000 | 20,000 |
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