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Virus Stopper Inc., a supplier of computer safeguard systems, uses a required rate of return of 12 percent to evaluate average risk projects, and
Virus Stopper Inc., a supplier of computer safeguard systems, uses a required rate of return of 12 percent to evaluate average risk projects, and it adds or subtracts 2 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $200,000 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $71,104. Project B, of less than average risk, will produce cash flows of $146,411 at the end of Years 3 and 4 only. Virus Stopper should accept OB with a NPV of $8,042. OA with a NPV of $15,968. OB with a NPV of $10,001. OA with a NPV of $7,177. O Both A and B because both have NPVs greater than zero.
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