You are a new financial analyst at Belvedere Corp., a large manufacturing firm that is currently looking into diversification opportunities. The vice president of marketing is particularly interested in a venture that is only marginally connected with what the firm does now. Other managers have suggested enterprises in more closely related fields. The proponents of the various ideas have all provided you with business forecasts from which you have developed financial projections including project cash flows. You have also calculated each projects IRR with the following results,

Project IRR Comments

A 19.67% Marketings project, an almost totally new field

B 19.25% Proposed by manufacturing, also a very different Field

C 18.05 Proposed by engineering, a familiar field

You are now in a meeting with senior managers that was called to discuss the options. You

have just presented your analyst, ending your talk with the preceding information.

After your presentation, the vice president of marketing stands, congratulates you on a fine

job and states that the figures clearly show that project A is the best option. He also says that

your financial analysis shows that project A has the full backing of the finance department. All

eyes including the CFO, turn to you. How do you respond?