1. PopEar Chicken is considering two potential projects, The Management Team under Jane has decided to present the cash flows from two recent proposals: the Lowasugar project and the Boostametabol project. All figures are in thousands of dollars:

Time of Cash Flow	Lowasugar	Boostametabol
Investment	-$17,500	-$15,500
Year 1	2,000	7,000
Year 2	3,700	5,500
Year 3	6,250	3,075
Year 4	7,000	3,200
Year 5	4,000	2,000

1. State and explain the decision rule behind the NPV method.
2. Compute the net present value (NPV) for each project by using a discount rate of 8.79% for projects of average risk.
3. Which of the two projects is more profitable?

Answer rating: 100% (QA)

The decision rule behind the Net Present Value NPV method is to accept projects that have a positive NPV and reject projects with a negative NPV NPV i... View the full answer