Question

You are a senior manager at Poeing Aircraft and have been authorized to spend up to $500,000 for projects. The three projects you are considering have the following characteristics:
Project A. Initial investment of $295,000. Cash flow of $190,000 at year 1 and $170,000 at year 2. This is a plant expansion project, where the required rate of return is 12 percent.
Project B. Initial investment of $405,000. Cash flow of $270,000 at year 1 and $240,000 at year 2. This is a new product development project, where the required rate of return is 24 percent.
Project C. Initial investment of $240,000. Cash flow of $160,000 at year 1 and $190,000 at year 2. This is a market expansion project, where the required rate of return is 17 percent.
Assume the corporate discount rate is 12 percent.
Offer your recommendations, backed by your analysis:


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  • CreatedJune 17, 2015
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