You are a senior manager at Airbus and have been authorized to spend up to 200,000 for
Question:
You are a senior manager at Airbus and have been authorized to spend up to €200,000 for projects. The three projects you are considering have the following characteristics:
Assume the corporate discount rate is 10 per cent.
Please offer your recommendations, backed by your analysis:
Transcribed Image Text:
Project A: Initial investment of 150,000. Cash flow of 50,000 at year 1 and 100,000 at year 2. This is a plant expansion project, where the required rate of return is 10 per cent. Project B: Initial investment of 200,000. Cash flow of 200,000 at year 1 and 111,000 at year 2. This is a new product development project, where the required rate of return is 20 per cent. Project C: Initial investment of 100,000. Cash flow of 100,000 at year 1 and 100,000 at year 2. This is a market expansion project, where the required rate of return is 20 per cent.
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Related Book For
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe
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