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Which project is more profitable? Consider two projects: Project A currently costs $ 1 3 million, which is to be paid this year. The returns
Which project is more profitable?
Consider two projects: Project A currently costs $ million, which is to be paid this year. The returns are $ million in one year and $ million in two years. Project B currently costs $ million, again to be paid this year. The returns are $ million in one year and $ million in two years.
At an interest rate of the net present value of Project is roughly while the net present value of Project B is roughly
Suppose investing in one project eliminates the opportunity to invest in the other. If the interest rate is Project is preferable.
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