Consider two mutually exclusive R&D projects that ADM is considering. Assume the discount rate for ADM is 15 percent.
Project A: Server CPU .13 micron processing project
By shrinking the die size to .13 micron, ADM will be able to offer server CPU chips with lower power consumption and heat generation, meaning faster CPUs.
Project B: New telecom chip project
Entry into this industry will require introduction of a new chip for cellphones. The know-how will require a large amount of up-front capital, but success of the project will lead to large cash flows later on.

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YEAR -$650,000 320,000 320,000 230,000 175,000 120,000 $975,000 260,000 350,000 360,000 400,000 500,000 IMPLICATIONS NPV IRR Incremental IRR Pl