Consider two mutually exclusive R D projects that ADM is considering
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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