Question
Your firm has identified three potential investment projects. The projects and their cash flows are shown here:(Click on the following icon in order to copy
Your firm has identified three potential investment projects. The projects and their cash flows are shown here:(Click on the following icon
in order to copy its contents into a spreadsheet.)
| Project | Cash Flow Today (millions) | Cash Flow in One Year (millions) | ||
| A | $10 | $20 | ||
| B | $5 | $5 | ||
| C | $20 | $10 | ||
Suppose all cash flows are certain and the risk-free interest rate is
10%.
a. What is the NPV of each project?
b. If the firm can choose only one of these projects, which should it choose based on the NPV decision rule?
c. If the firm can choose any two of these projects, which should it choose based on the NPV decision rule?
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The Financial Crisis Implications For Research And Teaching
Authors: Ted Azarmi, Wolfgang Amann
1st Edition
3319205870, 978-3319205878
