Question: Following are three independent projects Peanut/Pecan Processing (PPP) is evaluating: PPP generally considers risk when examining projects by adjusting its average required rate of return,

Following are three independent projects Peanut/Pecan Processing (PPP) is evaluating:

Project IRR Risk Low 10.0% Average 12.0 High 14.5

PPP generally considers risk when examining projects by adjusting its average required rate of return, r, which equals 11 percent. A 4 percent adjustment is made for high-risk projects, and a 2 percent adjustment is made for low-risk projects. Which project(s) should PPP purchase?

Project IRR Risk Low 10.0% Average 12.0 High 14.5

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