American Steel Corporation is considering two investments One is the purchase of a new continuous caster costing $100 million The expected net present value of this project is $20 million The other alternative is the purchase of a supermarket chain, also costing $100 million It, too, has an expecte...

If reducing the variability of the firms earnings is the desired objective purchasi ...

American Steel Corporation is considering two investments. One is the purchase of a new continuous caster costing

Question:

American Steel is considering two investments. One is the purchase of a new continuous caster costing $100 million. The expected of this project is $20 million. The other alternative is the purchase of a supermarket chain, also costing $100 million. It, too, has an expected of $20 million. The firm’s management is interested in reducing the variability of its earnings.
a. Which project should the company invest in?
b. What assumptions did you make to arrive at this decision?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...