Alberta Inc. is considering investing in two projects, each of which has an initial investment requirement of \( \S 100,000 ). Both A and B are "normal" risk for the company. A has a net present value of \(\$ 25,000 ). B has a net present value of \(\$ 20,000 \). None of the answers provided \(A) and \(B\) are equally valuable. \(A) is better than \(B) because it has a higher net present value and the same risk level. \(B\) is better than \(A \) because of the risk. There is insufficient information to make a rational choice between A and B.
Alberta Inc. is considering investing in two projects, each of which has an initial investment requirement of \( \S 100,000 ). Both A and B are "normal" risk for the company. A has a net present value of \(\$ 25,000 ). B has a net present value of \(\$ 20,000 \). None of the answers provided \(A) and \(B\) are equally valuable. \(A) is better than \(B) because it has a higher net present value and the same risk level. \(B\) is better than \(A \) because of the risk. There is insufficient information to make a rational choice between A and B.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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