Question
You are asked to choose one from two new projects, A and B. After a careful analysis, you report to Mr. Stern, the CEO, that
You are asked to choose one from two new projects, A and B. After a careful analysis, you report to Mr. Stern, the CEO, that A is better than B since it has a higher NPV (both have positive NPVs). Mr. Stern looks at you and says: Son, there is one key factor you ignored: 75% of our shareholders are senior citizens. Project B pays off only in three years, but project A pays off in ten years. Many of the shareholders wont be around to collect the dividends if we take A. They would be happier with project B. Would you agree with Mr. Stern? Explain your answer.
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