Question

You are a senior manager at Poeing Aircrafts and have been authorized to spend up to $300,000 for projects. The three projects that you are considering have the following characteristics:
Project A: Initial investment of $400,000. Cash flow of $175,000 at year 1 and $280,000 at year 2.
This is a plant expansion project, where the required rate of return is 10 percent.
Project B: Initial investment of $200,000. Cash flow of $195,000 at year 1 and $105,000 at year 2.
This is a new product development project, where the required rate of return is 20 percent.
Project C : Initial investment of $150,000. Cash flow of $160,000 at year 1 and $50,000 at year 2.
This is a market expansion project, where the required rate of return is 20 percent.
Assume the corporate discount rate is 10 percent.
Please offer your recommendations, backed by your analysis.


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  • CreatedOctober 01, 2015
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