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Problem:

A colleague has evaluated projects using the firm's average discount rate, which is the discount rate on the average risk project of the firm. He produced the following report:

Project NPV IRR Risk

A (800) 9.5% Average

B (450) 10.0% Low

C $1500 12.5% High

D 0 11.0% Low

If a project has a risk that is different from average, your firm usually adjusts the discount rate by adding or subtracting 2 percentage points. Suppose the four projects listed below are independent. Which project (s), you should choose and then why?

Please provide step by step solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147287

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